Interest on IB margin

Investing / Brokers
1

Hi there,
I wanted to ask for guidance on the rates for margin interests. I have used my margin depot 2-3 times so far to buy VT and once MRK. However, the amount where always pretty low and I reduced my negative balance within 3 months. No, I would be tempted to make a move with the planed SGEN/Pfizer acquisition. My thinking behind this is specially now in these troubled times it seems relatively clear and lower risk trade. Currently the SGEN share price is 215.5$ while the agreed acquisition price is 229$ = 13.5$ (6.3% discount right now). While the FTC clearance is pending (and the biggest risk) I feel that with the EU green light and the latest positive news from SGEN there should be a reduced risk for this deal. Furthermore, the AMGN/HZNP deal got waived through with way more red flags (knowing the AMGN history about price raises after acquisitions) at the end by the FTC.

My idea would be now to take out a significant amount of margin to buy SGEN shares until the acquisition closes, which according to both sources should happen late 2023 or Q1 2024.
For a potential 250’000$ margin I get an interest payment of 16’325$ according to the following page:

Do I understand this correctly and the 16’325$ would be the annual rate for the margin and hence if I would take it out for 4 months that would be only 16’325$/3= 5442$?

I’m tempted as the potential gain would be (250’000$ x 229$ / 215.5$) -250’000$ = 15’661$ gross - 5442$ = 10’219$ net.

Is my math and the interest rates correct?
Thanks for any input

2

Yes the interest rates are annual.

Do you have enough funds at IB to get a 250k margin loan?

3

Mostly putting it out there, if you’re considering leverage, why not options?

1 Like
4

So you’re willing to take a $250K risk on an acquisition for a mere gain of $10K, that right? Please back away from the computer for your own sake mate.

4 Likes
5

The risk in relation to the possible return doesn’t really strike me as attractive.
In that case, you might as well bet on Bitcoin. No risk, no fun :grinning:!

But in fact, interest is annualized on IBKR.

6

Activision Blizzard / MSFT

Good luck!

1 Like
8

Thanks :+1:

I do have funds for up to 380’000$ but I would obviously not go all in as the timing is unpredictable and the related risk.

I thought about that as well. However, with the timing again it’s hard to predict and looking at the available options the time factor would reduce all my gains if the deal takes to long to close.

I understand that from a risk perspective it does not look logical indeed. However, from my perspective even if the deal would at the end fail (which is very unlikely and would be the first of it’s kind at this stage in Biotech), there have been several positive news about Seagen ultimately that would justify already a price per share around 200$. Hence it’s not a hot or cold decision.

As mentioned I agree that the risk/gain overall does not look juicy. However, looking at all the craziness that is on-going right now it seems that in general stocks will go down on the short run and bonds provide something around 4% annually so it looks like a good market opportunity.

Thanks to all for your inputs looking at the pure numbers it sounds like a bad deal, however I see it as a market opportunity. I will keep looking at the situation and let you know if I make the move or not.