Am I correct in my understanding that this type of account wipe / margin call only happens when your unrealized P/L on opened positions approaches your cash balance?
Brokerage changes rules and wipes out my account. Is there any recourse?
- Thread starter pipepuller
- Start date
IMO, people who are bumping into margin requirements are way overleveraged. [It shouldn't matter if someone like IB changes margin requirements. The futures exchanges often bump up margins when volatility increases.]
Again, people think there is nothing wrong with things like 20:1 margin. (gee, $300 daytrading margin!!!) These are often the same people who discover why 90-95% of leveraged traders lose thier trading capital
Anything beyond 7:1 margin rapidly puts the trader at Risk of Ruin. Arguments to the contrary are probably from people who have yet to blow out an account from things like the volatility of the recent markets.
This trader has just gotten this lesson.
To CBOE,CFE traders:
Thu Aug 16 12:23:42 2007 EST
Effective immediately, the minimum margin for all VIX calendar spreads (index options and futures) will increase from $150 to $250.
Thu Aug 16 12:23:42 2007 EST
Effective immediately, the minimum margin for all VIX calendar spreads (index options and futures) will increase from $150 to $250.
To CFE traders:
Thu Aug 16 13:22:16 2007 EST
Customers holding positions in VIX futures and futures spreads are urged to URGENTLY evaluate their exposure. Based on current market pricing and volatility of VIX and related derivatives, we anticipate that the margin requirement to hold these contracts will increase to at least $500 for adjacent month spreads and 800 for spreads where the legs are more than 2 months apart. While we will attempt to provide some notification prior to raising VIX margins, we must warn clients that margin rate increases may occur without prior notice.
Thu Aug 16 13:22:16 2007 EST
Customers holding positions in VIX futures and futures spreads are urged to URGENTLY evaluate their exposure. Based on current market pricing and volatility of VIX and related derivatives, we anticipate that the margin requirement to hold these contracts will increase to at least $500 for adjacent month spreads and 800 for spreads where the legs are more than 2 months apart. While we will attempt to provide some notification prior to raising VIX margins, we must warn clients that margin rate increases may occur without prior notice.
I have to say Im so sorry for your expereince, youve been treated in a shoddy manner but once you sign that paper.. well....
I think you were lucky to trade without margin if thats what you claim, something tells me you were not correctly monitoring the spread and from what I am beginning to realize.. IB add an extra 10-15% ontop of the required margin set by the exchanges..why I don't know but it may have something to do with poor back office technology.. they really should have notified you at a point where at least you would have ended up flat from the position. Also Im surprised you didnt get some kind of Margin call in advance telling you all this precisely over the phone...
You have no recourse unfortunately, but Id look at the charges on top..that stinks to me.
Meanwhile the lesson is:
Never hold overnight positions in futures unless you have overnight access to the market.
Keep tabs on your account balance.. never max out the margin so your balance is actually nil when you place a trade.
You now have an education in this area... think of it as an expensive training pro gramme and move on.. get some cash together and have another (modified) attempt to master a path through this jungle..
This is a silly post. If you took a loss which was greater than your account equity, then your brokerage would be irresponsible to do anything other than liquidate your entire position. It was your own crazy risk taking and insane leverage that wiped your account, not IB.
Any spread has the possibility of losing on both legs. This is true even for "arbitrage" trades. Learn from this and do your homework next time.
Any spread has the possibility of losing on both legs. This is true even for "arbitrage" trades. Learn from this and do your homework next time.
"IB add an extra 10-15% ontop of the required margin set by the exchanges..why I don't know but it may have something to do with poor back office technology.. they really should have notified you at a point where at least you would have ended up flat from the position. Also Im surprised you didnt get some kind of Margin call in advance telling you all this precisely over the phone..."
is there such a thing as personal responsibility?
do you think the co. has nothing better to do then set up a personal alert and then call and waste time with a lengthy conversation.
is there such a thing as personal responsibility?
do you think the co. has nothing better to do then set up a personal alert and then call and waste time with a lengthy conversation.
Actually, the size wasnt that much. It's only a 30 lot vbi equivalent. CFE charges $1,500 margin for this position. It was the convergence that killed his account. The position he had is derived from the vix futures switches which observed a black swan by inverting >5 handles in the front months. Given the short life of the vix futures and even shorter for the vix ops, i honestly think that IB didnt understand the risks themselves prior to the recent vol spike. Margins going up 10x in some switches over several days is quite telling. I wonder how many accounts went debit before they realized the true risk of certain positions.
Better late then never i suppose, regardless the OP does have a valid reason to be upset but not excused.