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A vertical call debit spread triggers a margin call. Does that shound right?
- Thread starter jayre
- Start date
If that's the case, then the OP is out of luck.Quote from ForexForex:
IB only lets you trade with the balance above $2000.00, so I figure the OP was very close to the $2000.00 threshold after he entered the trade and the increased value of the short 75 calls lowered available funds below $2000.00. Then the margin call kicks in.
If your broker has a liquidation policy of anytime a account goes negative based on bid/ask prices, then you are SOL. It doesnt matter the position you have on hedged or not, because at that moment in time the market value of you positions put you account negative.
Be very wary of a broker who does this. Market goes wide you get cleaned out.
Be very wary of a broker who does this. Market goes wide you get cleaned out.
That's news to me, that a poistion can be liquidated even when there is no margin involved. So if you buy a stock with cash & you write a covered call and the options market goes crazy, and the ask on the call becomes more expensive for a few minutes would you get a margin call? That's not what I was told by my broker before.Quote from Rehoboth:
If your broker has a liquidation policy of anytime a account goes negative based on bid/ask prices, then you are SOL. It doesnt matter the position you have on hedged or not, because at that moment in time the market value of you positions put you account negative.
Be very wary of a broker who does this. Market goes wide you get cleaned out.
Just consider if we have a May 6th flash crash again, are we all in danger of liquidation?
Not that they're being implicated here but in defense of IB I've seen nothing but fair marks on hundreds of futures options, many of which routinely have no bid no offer. As most brokers do, they mark options using a theoretical model based on the underlying price.
I believe the only case where bid/offer are of consequence is where an option is bid above or offered below your broker's theoretical value.
OP is still being ambiguous about the details.
I believe the only case where bid/offer are of consequence is where an option is bid above or offered below your broker's theoretical value.
OP is still being ambiguous about the details.
Quote from jayre:
That's news to me, that a poistion can be liquidated even when there is no margin involved. So if you buy a stock with cash & you write a covered call and the options market goes crazy, and the ask on the call becomes more expensive for a few minutes would you get a margin call? That's not what I was told by my broker before.
Just consider if we have a May 6th flash crash again, are we all in danger of liquidation?
Since you are short, in theory you loss is unlimited. So some brokers consider shorts on margin and treat them as such. It really depends on your brokers liquidation policy. Some do it on mid points, some just give you a margin call that you have to meet, it all depends.
In answer to your last question, yes its possible, but it depends on your broker.
Very interesting what you saying. That's risky stuff.Quote from Rehoboth:
Since you are short, in theory you loss is unlimited. So some brokers consider shorts on margin and treat them as such. It really depends on your brokers liquidation policy. Some do it on mid points, some just give you a margin call that you have to meet, it all depends.
In answer to your last question, yes its possible, but it depends on your broker.
It would be nice to know the stock, option expiry, number of contracts and how much the options were.
From what I gather the underlining is at $28.00 and you bought a 65C / 75C debt spread. So I figure this must have been some high flying tech or bio stock that you expected to make a big move to $75.00 from $28.00. My guess is the options were priced around $0.05 - $0.10 and you bought/sold a lot of contracts, maybe as much as 100 contracts.
From what I gather the underlining is at $28.00 and you bought a 65C / 75C debt spread. So I figure this must have been some high flying tech or bio stock that you expected to make a big move to $75.00 from $28.00. My guess is the options were priced around $0.05 - $0.10 and you bought/sold a lot of contracts, maybe as much as 100 contracts.
Guost this is what you wrote last year, did you changed your mind since..?Quote from Ghost of Cutten:
The short answer is that any time you have a short-leg in an American-style option, you have open-ended risk due to the possibility of early exercise and overnight gap risk. You could theoretically lose more than your account value, and your broker would be on the hook.
The lesson is to know your broker's margin call and liquidation policy before, not after you start trading. And to realise that any time you short an American-style option, even if it's part of a spread, you have open-ended risk.
Was this IB, by any chance? Anyway, try arbitration if the amount was big enough.
Quote.
There is no risk beyond the premium paid in a debit spread. Just like there is no risk beyond the price paid for a share. If someone sells MSFT for -$100 per share, should IB liquidate all MSFT longs?
Quote from ForexForex:
It would be nice to know the stock, option expiry, number of contracts and how much the options were.
From what I gather the underlining is at $28.00 and you bought a 65C / 75C debt spread. So I figure this must have been some high flying tech or bio stock that you expected to make a big move to $75.00 from $28.00. My guess is the options were priced around $0.05 - $0.10 and you bought/sold a lot of contracts, maybe as much as 100 contracts.
Can't go into much details now. I will try to get some compensation from broker (atleast for the comissions)and will keep you guys updated.