In order to avoid margin call, simply don't hold position overnight, period. For futures, it's best to bail out 10 minutes prior to the close, eg. 3:05 CST. When I opened up a small account for a test project, my position was auto-liquidated at 3:10 and I was slapped with $50 account/margin fee.
avoiding automatic liquidation by IB
- Thread starter IBRex&me user
- Start date
Do you mean SME? I'm talking about the cutoff time. You can add closing orders after said time that would increase exposure. Before that the regular SME rules apply.
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Yes i think they did= when every bid ask was fractions.
You're blessed to get a live phone rep; like IBD founder says, NEVER answer a margin call. [NOT sure any actually use a phone for that ''call'' ]?? A practical way to avoid a margin call; did you see the current IBKR ad with SPY entry priced @ $200/+?? ]
I lost a significant amount today, in my opinion, because of incorrect liquidation by IB 
I was trading an iron condor that would expire today. I collected $2500 in credit for a spread which was $10000 wide. Risk $7500 (at least I thought). My account had sufficient margin to cover this exposure.
Unfortunately, towards the end of the day, the put side of the condor got ITM. At that point, IB's liquidation algo went crazy: it liquidated the long leg of my position and let the short one run. They left me with a naked short position!
The underlying continued to fall and 15 minutes later also the short side was liquidated, at a $15k loss, twice as big as the risk I thought I took on. Shortly thereafter price was going up again. At end of the day my position would have been only partially ITM
Surely they cannot do this right? They should always have liquidated the spread as a whole. Not only the long side.
But it's actually worse: during the liquidation process of my long leg, various other, very profitable, positions were liquidated as well, which did not consume any margin!
I spend days legging into risk-free trades (i.e. no cost calendar spreads, no cost debit-spreads) and created a massive arb position that would expire next week after earnings release, which would generate me a very substantial profit.
Not only did I lose on the condor trade, I also lost my risk-free arbs and with that a big sure profit.
I've called IB. The representative who helped me understood my situation and I had the idea he agreed to my point, but he mentioned he could not do anything as this was "how the system worked".
I'm extremely upset at the moment. I guess IB has their ass covered in situations like these, so no possibility I can get anything refunded, even though I really feel it has not been handled correctly on their part.
I was trading an iron condor that would expire today. I collected $2500 in credit for a spread which was $10000 wide. Risk $7500 (at least I thought). My account had sufficient margin to cover this exposure.
Unfortunately, towards the end of the day, the put side of the condor got ITM. At that point, IB's liquidation algo went crazy: it liquidated the long leg of my position and let the short one run. They left me with a naked short position!
The underlying continued to fall and 15 minutes later also the short side was liquidated, at a $15k loss, twice as big as the risk I thought I took on. Shortly thereafter price was going up again. At end of the day my position would have been only partially ITM
Surely they cannot do this right? They should always have liquidated the spread as a whole. Not only the long side.
But it's actually worse: during the liquidation process of my long leg, various other, very profitable, positions were liquidated as well, which did not consume any margin!
I spend days legging into risk-free trades (i.e. no cost calendar spreads, no cost debit-spreads) and created a massive arb position that would expire next week after earnings release, which would generate me a very substantial profit.
Not only did I lose on the condor trade, I also lost my risk-free arbs and with that a big sure profit.
I've called IB. The representative who helped me understood my situation and I had the idea he agreed to my point, but he mentioned he could not do anything as this was "how the system worked".
I'm extremely upset at the moment. I guess IB has their ass covered in situations like these, so no possibility I can get anything refunded, even though I really feel it has not been handled correctly on their part.
You can leave IB like all of us have been advising for years here for exactly this reason!I lost a significant amount today, in my opinion, because of incorrect liquidation by IB
I was trading an iron condor that would expire today. I collected $2500 in credit for a spread which was $10000 wide. Risk $7500 (at least I thought). My account had sufficient margin to cover this exposure.
Unfortunately, towards the end of the day, the put side of the condor got ITM. At that point, IB's liquidation algo went crazy: it liquidated the long leg of my position and let the short one run. They left me with a naked short position!
The underlying continued to fall and 15 minutes later also the short side was liquidated, at a $15k loss, twice as big as the risk I thought I took on. Shortly thereafter price was going up again. At end of the day my position would have been only partially ITM
Surely they cannot do this right? They should always have liquidated the spread as a whole. Not only the long side.
But it's actually worse: during the liquidation process of my long leg, various other, very profitable, positions were liquidated as well, which did not consume any margin!
I spend days legging into risk-free trades (i.e. no cost calendar spreads, no cost debit-spreads) and created a massive arb position that would expire next week after earnings release, which would generate me a very substantial profit.
Not only did I lose on the condor trade, I also lost my risk-free arbs and with that a big sure profit.
I've called IB. The representative who helped me understood my situation and I had the idea he agreed to my point, but he mentioned he could not do anything as this was "how the system worked".
I'm extremely upset at the moment. I guess IB has their ass covered in situations like these, so no possibility I can get anything refunded, even though I really feel it has not been handled correctly on their part.
I lost a significant amount today, in my opinion, because of incorrect liquidation by IB
I was trading an iron condor that would expire today. I collected $2500 in credit for a spread which was $10000 wide. Risk $7500 (at least I thought). My account had sufficient margin to cover this exposure.
Unfortunately, towards the end of the day, the put side of the condor got ITM. At that point, IB's liquidation algo went crazy: it liquidated the long leg of my position and let the short one run. They left me with a naked short position!
The underlying continued to fall and 15 minutes later also the short side was liquidated, at a $15k loss, twice as big as the risk I thought I took on. Shortly thereafter price was going up again. At end of the day my position would have been only partially ITM
Surely they cannot do this right? They should always have liquidated the spread as a whole. Not only the long side.
But it's actually worse: during the liquidation process of my long leg, various other, very profitable, positions were liquidated as well, which did not consume any margin!
I spend days legging into risk-free trades (i.e. no cost calendar spreads, no cost debit-spreads) and created a massive arb position that would expire next week after earnings release, which would generate me a very substantial profit.
Not only did I lose on the condor trade, I also lost my risk-free arbs and with that a big sure profit.
I've called IB. The representative who helped me understood my situation and I had the idea he agreed to my point, but he mentioned he could not do anything as this was "how the system worked".
I'm extremely upset at the moment. I guess IB has their ass covered in situations like these, so no possibility I can get anything refunded, even though I really feel it has not been handled correctly on their part.
IB is probably the worst broker to trade spreads. I stopped trading with them after speaking to customer svc on how their system handles such theoretical scenarios a while back. I hope you are able to get some compensation from this.
Show us these risk free arbs. I thought those dried up in 1988.
"I spend days legging into risk-free trades (i.e. no cost calendar spreads, no cost debit-spreads) and created a massive arb position that would expire next week after earnings release, which would generate me a very substantial profit.
Not only did I lose on the condor trade, I also lost my risk-free arbs and with that a big sure profit."
"I spend days legging into risk-free trades (i.e. no cost calendar spreads, no cost debit-spreads) and created a massive arb position that would expire next week after earnings release, which would generate me a very substantial profit.
Not only did I lose on the condor trade, I also lost my risk-free arbs and with that a big sure profit."
I see what you mean. I should have used different words I guess. I legged into zero-cost spreads, creating the risk free positions. There was some risk creating them. 2 Examples:
1. Calendar spreads: buy 20MAR calls at $6.00. Price goes up. Sell 6MAR calls against them also for $6.00. Do the same on put side.
2. Debit spreads: buy 6 MAR $40 Call for $5.00. Price goes up. Sell 6 MAR $41 Call against it for $5.00. Same on put side.
I did this on a stock with ER next week, which is also highly volatile. After ER, either put side or call side would have been profitable.
Anyway, the point of my message was that I did not understand why these were liquidated. After their algorithm removed the long side of my credit spreads, my margin positions was approx. -$500k, firing other algo's off to basically liquidate my whole account, including these positions
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I see what you mean. I should have used different words I guess. I legged into zero-cost spreads, creating the risk free positions. There was some risk creating them. 2 Examples:
1. Calendar spreads: buy 20MAR calls at $6.00. Price goes up. Sell 6MAR calls against them also for $6.00. Do the same on put side.
2. Debit spreads: buy 6 MAR $40 Call for $5.00. Price goes up. Sell 6 MAR $41 Call against it for $5.00. Same on put side.
I did this on a stock with ER next week, which is also highly volatile. After ER, either put side or call side would have been profitable.
Anyway, the point of my message was that I did not understand why these were liquidated. After their algorithm removed the long side of my credit spreads, my margin positions was approx. -$500k, firing other algo's off to basically liquidate my whole account, including these positions
The liquidation looks to have been due to expiration risk. With one put in the money and being assigned and the other options lapsing you would have been on the hook for purchasing shares at a magnitude of nearly 50x your NLV.