Before entering a short position, you’ll receive a message outlining how much it would cost per day to borrow the selected security (when applicable) along with your order confirmation. If you accept the payment and trade, your order will be sent to the exchange, and you will be charged for each full day you hold the short position (risk reviews may still apply).
The borrow rate is a floating one; it can change throughout the day up to 2 p.m. ET. Rates fluctuate based on the security’s market value, demand, and available inventory. If fees increase beyond the amount you’re willing to pay, all you will have to do is buy to close your short position before 5:30 p.m. ET to avoid being charged. Once you enter a short position, you will find current rates by going to the Positions tab and hovering over the R icon.
- Intraday shorting - no fees apply when you close your short positions before 5:30 p.m. ET. (excluding commissions)
- You can view borrow rates from your level 1 & Level 2, Watchlist, and Positions tabs.
For your reference, daily borrow fees are calculated as follows: (Borrow rate) x (market value of the security)/365 days in the year.
Here's an example:
You borrow 100 shares of AAPL. You hold the shares past 5:30 p.m. ET and sell them the next day. At the end of the day, the stock was valued at $130 per share, making your total short position $13,000. Now suppose that the stock is in high demand, so your borrow rate is at 20%.
Your borrow fee for the day would be (20% x $13,000)/365 = $7.12. The borrow rate shown in the borrow rate agreement is an estimate of what the borrow rate for your investment will be. Also, when you agree to pay the fee to borrow an investment short, it does not guarantee the availability of the position for the entire duration you intend to hold the short position.