What is the most cost effective way to hold a short position? Leveraged ETF or sell in CFD? Or something else?
Depends I would say, I extremely rarely use cfd, I am sure others are more knowledgeable, but I think through cfd you have overnight fees to consider
Leveraged ETF are sometimes adjusted on a daily basis. When that’s the case they are not meant to be held overnight although they could, but you lose some value each rollover
You gotta check what the fees of leveraged etfs are in general since that’s where the bulk of your cost lies
Not sure that helped, sorry
Thanks for the reply and you’ve covered the questions/concerns I have. I know the CFDs have interest that is charges or accrued on an overnight position as I’ve seen those, so that is clear. I’m just not sure how those are shown, if at all for holding inverse ETF for more than intraday.
If you aren’t meant to hold short positions open for longer than a day…how do you short?
Well, with a broker that supports shorting.
CFDs or Inverse ETFs are just common derivatives that pack the features, useful when you don’t have other availability. And indeed, T212 doesn’t have shorting.
Other brokers may or may not offer short selling; common recommendation would be Interactive Brokers.
As a little note, while an actual short position will always be cheaper than an Inverse ETF or a CFD, there are still some margin fees (since you are borrowing an asset, you have to pay interests close to the risk-free rate on this), and there may be some harder-to-meet capital requirements to be allowed to short in the first place.
Also! A short position may sometimes be liquidated without your permission, even if well within margin requirements.
Two cases that would arise: shares are being recalled, from a corporate event, or because most of the broker’s clients are selling out of their position. Or sometimes, a short position must be covered by a certain date.
Thank you. This is awesome insight. I really appreciate it