Suppose I have a $1M long position in SPY that I hold indefinitely. Separately, I sell short $1K of SQQQ and immediately use the $1K in cash proceeds to purchase QQQ.
How is the fee calculated? Is it ONLY the borrowing fee of roughly 2.5%-3% of $1K? Or, is it borrowing fee (2.5%-3%) + margin interest rate (5% on Robinhood, for example)? Is it very different across the brokers? Thanks for your help!
Using cash from shorts to long other stocks. Fee?
byu/Sea_Deer83 ininvesting
Posted by Sea_Deer83
2 Comments
Using short sale proceeds to long other stocks still costs you margin interest on the full debit balance – the cash from the short doesn’t sit free, it’s borrowed against. Check your broker’s margin rates because they add up fast on leveraged plays. I learned that the hard way holding a short too long while funding longs
As long as you’re not timing moves impulsively, using short profits for long positions can work fine, just keep an eye on tax implications and trading costs.