I need some clarification on the calculation of margin interest. I understand that if I were to have a hypothethical portfolio of $10,000 and I bought $15,000 dollars worth of stock I would be charged interest on the $5,000 dollars borrowed to buy stock. My question is how this works on the short side. If I had the same $10,000 dollar portfolio and and bought $10,000 dollars of stock and SHORTED $5,000 dollars in stock would I be charged margin interest on the $5,000 worth of shorts? Is there a difference?
For a retail account there is no difference for long or short margin... It is possible there could be a difference since there is no rules that say this has to be the same that I am aware of, but I have never seen this calculated differently. Professional accounts may collect short interest on short stock.
Thanks. I'm just confused because on my monthly statement I am actually receiveing interest and not paying interest. For example I have $10,000 in equity and $10,000 longs and $5,000 shorts. I have never seen any interest charges on my statement.
Are you a retail account? If so then you probably have a cash balance. If you never use margin then you are not charged interest. Cash in the account earns interest, investing with more than your cash costs you interest.