TransWikia.com

How is interest on shorted shares calculated?

Personal Finance & Money Asked by Kaguya Ōtsutsuki on September 3, 2020

Is the formula below correct?

[Shares shorted * price sold] * [annual interest rate / 360 * # of days borrowed] = interest charged

Based on the formula, it doesn’t seem like interest is compounded.

One Answer

The formula is:

  • (Borrow rate) x (market value of the security)/365

It's a borrow fee rather than interest. The borrow rate and the price of the security can fluctuate daily. It is charged for holding a short position overnight and is calculated daily. Typically, it accrues and is debited monthly.

Answered by Bob Baerker on September 3, 2020

Add your own answers!

Ask a Question

Get help from others!

© 2024 TransWikia.com. All rights reserved. Sites we Love: PCI Database, UKBizDB, Menu Kuliner, Sharing RPP