margin trading

[niketennis1]

Can anyone explain how interest is accrued on margin trading. I saw on E*trade that my interest would be around 11%. Now is this 11% yearly or monthly or something like that. I'm thinking about trading a little on margin (not too much because I don't want to do anything stupid and lose all of my money in my account). Thanks for any info

[flybynight]

Nike,

E*Trade margin accounts accrue interest monthly, but the % is based in the annual percentage rate. E*Trade also has a sliding scale based on the amount of money you borrow on margin (the greater debt the lower interest rate you pay). They will allocate the interest owed each month and you can see that under your Trading & Portfolio tab under the Transaction History link.

Hope this helps.

[netwrangler]

Can anyone explain how interest is accrued on margin trading. I saw on E*trade that my interest would be around 11%. Now is this 11% yearly or monthly or something like that. I'm thinking about trading a little on margin (not too much because I don't want to do anything stupid and lose all of my money in my account). Thanks for any infoThe interest is an annual rate.
When and how it is charged could vary by broker. The is definitely something I would ask my broker. They should be happy to explain it.

[niketennis1]

yea I probably will call E*trade up and ask about that. I mean, if I had to pay 11% on the amount I borrow per month, there is no way I would even think about trading on margin because that is extremely risky.

[XOM]

As stated the interest is annual; if you borrowed $10,000 you would owe $1100 in interest on a yearly basis. A broker will typically bill you on a monthly basis while the interest accrues daily. Divide the yearly amount by 365 to get the daily amount, which in this case would be $3.01 per day. The interest while unwelcome is not the real danger here as it is a known variable, having your equity fall below the broker's minimum making a margin call necessary is where you can get into trouble. If you pay back the borrowed funds before the end of the day you will not accrue any interest, some brokers may vary though.

[niketennis1]

thanks for all the info.