Carrying a Position Overnight: What You Are Charged For and Who Decides to Close It

The night costs more than it seems: the broker charges a fee for carrying an uncovered position, and the main risk of this interval is the kind that no protective order can close. While the market is shut, a stop is not executed, and the opening price may turn out to be on the other side of your level — the loss is locked in not where you planned it, but where the market agreed to trade in the morning. Hence a simple rule: the decision to carry a position is taken before the session closes and is treated as a separate trade with its own price and its own risk, not as "doing nothing".

What exactly is carried overnight

What is carried is not "a share in the portfolio" but a debt. If the position is opened entirely with your own money, the night costs nothing: the security simply sits in the account, and the only risk you bear is market risk. A charge arises where there is a position carried on borrowed funds or borrowed securities: in a leveraged long the broker lends you money, in a short it borrows the security for you. At the turn of the day the position is technically closed and reopened — this is a position rollover, and it is for this rollover that the carry fee is debited.

The size of the fee depends not on your luck but on the cost of money: carry rates are tied to the key rate and to money-market rates, the broker's margin is added on top, and in a short there is also the scarcity of the security itself. The less liquid the security, the more expensive and erratic it is to borrow. The logic by which the cost of credit rises and falls for the whole market at the same time is set out in the piece on the credit cycle — the carry rate comes from the same place, not from a tariff sheet you read once upon a time.

It is worth remembering separately: a carry over a weekend or public holidays stretches across several calendar days, and the fee accrues for each of them, even though there are no trading days in between. That is why the cost of carry is calculated not "per night" but for the actual holding period until the next session.

The risk that a stop does not close

Between the close and the open your order is not alive. A protective stop will trigger only if there is trading and liquidity at the required price, and a morning gap jumps over the level: execution will take place at the first available price, not at yours. This is the main difference between intraday and overnight risk. Within the day you manage the position continuously; overnight you hold it blind, and everything that has happened in the meantime — an earnings report, a statement from the regulator, a corporate event, a move in foreign markets — is priced in at once and in full.

You can check which events fall on the coming days in the corporate events calendar and in the issuer reports section. Carrying leverage through the night on which a report is published is a deliberate bet on the content of that report, not a neutral holding.

Margin requirements by the morning and forced liquidation

The second mechanism of overnight risk is the recalculation of collateral. A gap reduces the value of the portfolio, while the requirements for the position, on the contrary, rise as volatility grows, and by the morning the margin cushion may turn out to be negative. From that point the decision is no longer the trader's: the broker issues a margin call and, if the cushion is not restored, carries out a forced liquidation — at the market price, at an inconvenient moment and with no regard for your scenario.

This is where the liquidity horizon comes into play: the longer it would take you to exit the position without a noticeable impact on the price, the higher the collateral requirements and the sooner that inconvenient moment arrives. For this reason the position size chosen for an overnight carry is smaller than for intraday trading in the same ticker: you are paying not only the carry fee, but also for the ability to survive a gap without being closed out by someone else's hand. How to calculate this cushion step by step is covered in the piece on how to assess position risk.

Why it is the losing position that gets carried

The most common carry is the unplanned kind. A profitable position is closed willingly at the end of the day, while a losing position is left "until the morning, in case it recovers". This is the disposition effect, and the night is its favourite time: the decision to carry is disguised as the absence of a decision. The sign of a problem is simple: if you cannot state the reason for the carry in words before the session closes, there is no reason, and the carry fee has already been charged.

What to do before the session closes

Step 1 — name the scenario: why the position stays overnight and at what opening price the plan is cancelled. Step 2 — calculate the carry fee for the whole period, weekends included, and compare it with the expected move. Step 3 — check the calendar of events and record dates for the security. Step 4 — reduce the size to a level that survives a gap without a margin call, not to a level at which "the stop will protect". Step 5 — decide in advance what you will do at the open if the gap has gone against you: close immediately or hold under a condition described beforehand. The instrument card — {{instrument:SBER}} — and the news feeds help to get through step 3 faster.

If you do not want to carry, but do not want to leave the market either, what remains is an instrument without leverage: a position funded with your own money in stocks, OFZ or funds generates no carry fee and gives the broker no grounds to close you out in the morning. The market risk of a gap remains all the same — it does not go anywhere, it simply stops being accompanied by forced liquidation. Definitions of all the concepts used here are collected in the glossary.