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A vertical call debit spread triggers a margin call. Does that shound right?
- Thread starter jayre
- Start date
No it does not sound right.Quote from jayre:
Thanks for the link. In that link the person had forex positions, while in my sitiuation there was "no other positions". Which brings back the question does that sound right, any option experts here that can answer?
If there are no, and I mean NO, other circumstances or pertinent information then in my professional opinion your broker made a serious mistake. Was this IB and their automated computer getting you out of the trade? You will probably get more help if you give all the exact specifics, but since you refuse to do so then the best I can say is that it should not have happened, however we are all assuming there is something pertinent you are not telling us. What did the broker say when you asked them?
Again there was nothing "nothing" else in the account besides the spread. My broker says that since the market was volatile the price of the short leg at that moment became more expensive then the long leg making the acount negative. I don't want to go into any details now because my point here is not to bash anyone, it is just to find out if that sounds right or not. If I was not treated right, what are my options? can I ask for a refund? Can I get credit for the trade commisions?Quote from opt789:
No it does not sound right.
If there are no, and I mean NO, other circumstances or pertinent information then in my professional opinion your broker made a serious mistake. Was this IB and their automated computer getting you out of the trade? You will probably get more help if you give all the exact specifics, but since you refuse to do so then the best I can say is that it should not have happened, however we are all assuming there is something pertinent you are not telling us. What did the broker say when you asked them?
All the options where fully covered with zero margin requirment and zero risk besides the debit paid, however the volatile market just skewed the pricing. What's wrong with that sitiuation?Quote from rew:
Your situation is certainly bizarre, although I'm not saying that it didn't happen. For one thing, that vertical spread must have eaten up essentially all of the cash in your account. Rare is the option trader who commits all his capital in one trade like that.
It depends on your broker. Some will admit that it probably shouldnât have happened and refund something to you, others will say screw you even if they were wrong and you have to take them to arbitration. The simple fact is that the reg-t margin requirement for a normal, properly formed debit vertical is just the debit you paid, so there was no reason for them to take action in your account, their risk system is clearly in error in case like that. If you want to make a big deal about it ask to talk to their series 4 guy and have him explain how exactly the account was at risk, because marks having nothing to do with the actual risk, and tell them you are going file complaints with all the regulators.Quote from jayre:
Again there was nothing "nothing" else in the account besides the spread. My broker says that since the market was volatile the price of the short leg at that moment became more expensive then the long leg making the acount negative. I don't want to go into any details now because my point here is not to bash anyone, it is just to find out if that sounds right or not. If I was not treated right, what are my options? can I ask for a refund? Can I get credit for the trade commisions?
I donât really see the point in this thread at this point though. You already knew the answer, you got it confirmed here. If you arenât willing to give specifics, then just go after the broker knowing they were wrong and see how they react. If you donât like the answer then switch brokers, and file arbitration if it was a significant amount of money.
What was your leverage factor? Are your options american or european? What was your margin report before the liquidation (the system may view your positions in a different way than you may see them because of equivalences)?
It is also my opinion that a credit spread is not necessarily limited in risk. I cannot say more about this, but there are risks that exist but may not be perceived by the observer.
It is also my opinion that a credit spread is not necessarily limited in risk. I cannot say more about this, but there are risks that exist but may not be perceived by the observer.
Quote from jayre:
All the options where fully covered with zero margin requirment and zero risk besides the debit paid, however the volatile market just skewed the pricing. What's wrong with that sitiuation?
I'm assuming all your capital was used to put on the spread? That's your first problem.
It is strange but my guess is your brokers risk controls treat the legs seperately and price off of the bid on the long call and ask on the short call. When the spreads blew out it assumed closing the trade would put you in negative equity and issued the margin call.