Margin interest calculator

How the daily charge is built

Interest accrues on the debit balance for every calendar day the loan is open, Saturdays and Sundays included, and posts to the account monthly. The daily figure is the balance times the annual rate, divided by the day count written into the margin agreement. Many firms divide by 360. Some use 365. At a hypothetical 11% on $15,000 with a 360-day basis, the loan costs $4.58 a day and $45.83 over a 10-day swing trade.

The divisor matters more than it looks. Charged on each of the 365 days in a calendar year but priced on a 360-day basis, the loan costs 365/360 of the quoted rate, so a hypothetical 11% comes to about 11.15% of the balance, and the yearly output uses the full calendar year for that reason.

Reading the gain needed

The last output divides the period's interest by the value of the position the loan paid for. On a $45,000 position, $45.83 is about 0.10%. That sounds trivial next to a trade aiming for 5%. It grows on longer holds, though, and on trades that go nowhere: a position held for months that ends flat still owes every day of interest. Is trading on margin worth the interest turns the figure into a break-even test, and holding swing trades on margin weighs it against the overnight gap that comes with the loan.

Where your statement will differ

Rates are usually tiered by balance and quoted as a spread over a base rate the firm can change at any time, so one rate held across a long period is an estimate. The balance moves too. Unpaid interest that posts gets added to the debit, cash from sales and dividends reduces it, and every new purchase on margin raises it, while the statement charges each day on that day's actual balance. Check the rate table and the day count before you trust any projection. Whether the interest can be deducted is a separate matter, covered in is margin interest tax deductible; situations differ. The lesson on what margin interest costs over a day, a month and a year works the same sums by hand.