Best Broker for OPtions trading -margin req at Interactive Brok Canada are horrendous

Anion · Nov 22, 2010

Covered Calls requirement at IB

http://www.interactivebrokers.ca/en/p.php?f=marginCA&p=ssf-default

"In the money amount + 20% * SSF market value. Proceeds from the short option are applied."

I have a $5 December covered call on Barrick gold (abx: nyse). It costs me $1800 in margin to be long 100 shares and $2300 in margin to sell a covered call. Shorting naked puts is even worse. I talked to 3 other options traders up here and they all had the same complaint.

ForexForex · Nov 22, 2010

Quote from Anion:

I have a $5 December covered call on Barrick gold (abx: nyse). It costs me $1800 in margin to be long 100 shares and $2300 in margin to sell a covered call. Shorting naked puts is even worse. I talked to 3 other options traders up here and they all had the same complaint.

That's for ITM CC's , big difference over OTM CC's. It's only 20%. The $1800 - I think it's $2000 - is minimum balance to open trades with a margin account.

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spindr0 · Nov 22, 2010

Quote from cmhackett:

Judging from the fact that "Anion" just registered this month, and all of his 3 posts are part of this thread, and that he simply regurgitated his 1st statement when others asked questions (without answering their questions at all) - I'd say he's just trying to steer people away from IB for some reason. Shill? Pissed about something else?

Now that's a reply that makes sense. OP's info is a mish mosh of gobbledygook - a SSF commission schedule for a $5 Dec CC when no Dec 5's exist and numbers which have no relevance to the schedule posted. And selling a CC 45 pts ITM? I'n not even going there

Anion · Nov 23, 2010

Quote from spindr0:

Now that's a reply that makes sense. OP's info is a mish mosh of gobbledygook - a SSF commission schedule for a $5 Dec CC when no Dec 5's exist and numbers which have no relevance to the schedule posted. And selling a CC 45 pts ITM? I'n not even going there

Sorry that should read $50 not $5 a typo.
Here is a cut and paste from my margin report on Kinross.

KINROSS GOLD CORP 2,164.80 2,164.80
CoveredCallPosition 1,837.00 541.20 541.20 --
KINROSS GOLD CORP 100 18.0400
KGC 18DEC10 19 C -1 0.3300
LongStockPosition 5,412.00 1,623.60 1,623.60 30.00
KINROSS GOLD CORP 300 18.0400

to be long 300 shares it requires 1,623.60 in margin and to sell one covered call it requires 541.20 in Margin.

Kirkx · Nov 23, 2010

IB has some weird U$2000 "reserve funds" rule that I haven't seen with any other broker and it especially affects your margin when the account is low on funds.

Let's say you simply want to buy-to-open straight calls for the trade value of $19,500 and only have $20,000 in the account. With any other broker that would be no problem, but with IB you can only open the position for about $18,000 in trade value. I'm saying "about" because it isn't even exactly $18,000, it is somewhere around that number. One time I was playing around with this placing and cancelling fake orders and it wasn't exactly $2000 rule, but it was close.

OptionsXpress now has official Canadian division, so there is alternative to IB. Their commissions are higher, their trading platform looks better than Java anachronism from IB, and there is no $10,000 account minimum, although they still apply "pattern day trader rule" to Canadian customers just like IB (for stocks and options), so it's a mixed bag.

spindr0 · Nov 23, 2010

Quote from Anion:

KINROSS GOLD CORP 2,164.80 2,164.80
CoveredCallPosition 1,837.00 541.20 541.20 --
KINROSS GOLD CORP 100 18.0400
KGC 18DEC10 19 C -1 0.3300
LongStockPosition 5,412.00 1,623.60 1,623.60 30.00
KINROSS GOLD CORP 300 18.0400

to be long 300 shares it requires 1,623.60 in margin and to sell one covered call it requires 541.20 in Margin.

Shares are $18.04 and you have 300 shares so share value is $5412

Equity margin is 30% so margin requirement for 300 shares is $1623.60

Margin on covered call is adjusted by ITM amount. The call is OTM so no adjustment.

If your margin requirement for 300 shares is $1623.60 then it's $541.60 per covered call (like divide by 3 ?). What's the problem?

Anion · Nov 23, 2010

Quote from spindr0:

Shares are $18.04 and you have 300 shares so share value is $5412

Equity margin is 30% so margin requirement for 300 shares is $1623.60

Margin on covered call is adjusted by ITM amount. The call is OTM so no adjustment.

If your margin requirement for 300 shares is $1623.60 then it's $541.60 per covered call (like divide by 3 ?). What's the problem?

Its 541.60 for one covered call the other positions are just simply long. Not all shares are marginable s oif I want to sell a covered cal lagainst them it takes a massive amount of margin. Selling a naked call is absolutely crazy with IB. Anyways there are a lot of traders up here that are telling me the exact same thing. A lot of traders looking for a broker up here.

spindr0 · Nov 23, 2010

Quote from Anion:

Its 541.60 for one covered call the other positions are just simply long. Not all shares are marginable s oif I want to sell a covered cal lagainst them it takes a massive amount of margin. Selling a naked call is absolutely crazy with IB. Anyways there are a lot of traders up here that are telling me the exact same thing. A lot of traders looking for a broker up here.

On one hand, you have the IB web site and the cut and paste from your margin statement saying one thing about margin and on the other hand there's a lot of traders telling you something else. And with that, I bid you adieu... and to some others, a don't.

thenmmm · Nov 23, 2010

Quote from Anion:

I am looking for a broker that has low prices and good margin rates. Interactive brokers Canada charges horrendous margin requirements. Selling a covered call requires a huge amount of margin much more than twice the margin required for owing the stock outright.

interactive brokers probably has the lowest commissions. Often useful if you intend to buy many contracts deep otm.
Optionsxpress seem ok too - but their commissions are relatively high. Bank of america probably have the worst commissions, despite their name in the indsutry.

Anion · Nov 23, 2010

Quote from spindr0:

On one hand, you have the IB web site and the cut and paste from your margin statement saying one thing about margin and on the other hand there's a lot of traders telling you something else. And with that, I bid you adieu... and to some others, a don't.

Perhaps the differences with what the other traders and I are experiencing can be explained by the differeces between IB and IB Canada. Since IB prohibits Canadians from opening an American account, I am looking to move my business elsewhere. Anyways a lot of Canadian traders are also looking to leave.