I don't think you can blame the broker. I think you should blame yourself, because you had no idea what you were doing and what kind of risks you were taking. I think you were gambling, not trading. I think it was inevitable that your account would eventually be wiped out, no matter what the broker did. I think the broker's margin policies, and occasional changes to it, were calculated to protect the broker, and its other customers, from suffering losses caused by gamblers. If the broker had allowed gamblers to generate large losses they couldn't cover, and which the brokerage itself couldn't cover so that the broker went bankrupt, then the assets of its customers could have been tapped, in order to cover the deficit. A broker with strict risk control protects its trader customers from its gambler customers.
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Brokerage changes rules and wipes out my account. Is there any recourse?
- Thread starter pipepuller
- Start date
Quote from sporky:
IB is known for its lack of "handholding"
And it must also be known for its completely ambiguous and illegible margin requirements. What language are they writing in?
http://individuals.interactivebroke...uirements/stockIndexOptions.php?ib_entity=llc
"Put Spread" (Maximum (aggregate short put strike - aggregate long put strike, 0)). Long option cost is subtracted from cash and short option proceeds are applied to cash.
This looks like it's supposed to be a function in excel or something. Most places I've seen for credit spread margin requirements have: Difference between strikes, proceeds from the trade credit included.
an after affect of 90's bubbleQuote from spreadgod:
And it must also be known for its completely ambiguous and illegible margin requirements. What language are they writing in?
http://individuals.interactivebroke...uirements/stockIndexOptions.php?ib_entity=llc
"Put Spread" (Maximum (aggregate short put strike - aggregate long put strike, 0)). Long option cost is subtracted from cash and short option proceeds are applied to cash.
This looks like it's supposed to be a function in excel or something. Most places I've seen for credit spread margin requirements have: Difference between strikes, proceeds from the trade credit included.
How much leverage were you using(long calendars per $10k equity) and were you placing long calendars in the vix ops for credit to have $0 req? My guess is you had a ton of aug/sep calendars and IB got nervous when the front month futures switch inverted over 4 handles.
IB increased margin reqs on the VIX futures calendars from $50 to $150-$350 which is significant but shouldnt have caused a problem if you were well within your account size. In my opinion, the new margin reqs are still low and most people should not even be allowed to trade vix derivs.
IB increased margin reqs on the VIX futures calendars from $50 to $150-$350 which is significant but shouldnt have caused a problem if you were well within your account size. In my opinion, the new margin reqs are still low and most people should not even be allowed to trade vix derivs.
Quote from jimrockford:
If the broker had allowed gamblers to generate large losses they couldn't cover, and which the brokerage itself couldn't cover so that the broker went bankrupt, then the assets of its customers could have been tapped, in order to cover the deficit. A broker with strict risk control protects its trader customers from its gambler customers.
In hindsight perhaps I was gambling more than trading. But for the past 6 months I was doing debit calendar spreads for a debit and realized there was something quite wrong when my short calls inverted past my long May/08 calls. So as you say, if IB wanted to truly protect itself and all of its clients then they shouldn't have been portraying a product as hedged when in fact it was not.
This tells me IB didn't fully understand the VIX product either, otherwise they would have required $100, $200 maybe $500 margin/contract right from the start!
Wow, first let me say that I wish you the best. Nobody likes blowing out; otoh, realize that most everyone I know has done it at one time, some of us a couple times, so it's not the end unless you want it to be.
Also, you have two wonderful lessons. First, know what you are trading and what can happen when. IOW, what is worst case? Don't be so impatient and don't get so greedy that you shoot yourself in the foot.
Second, you have now had first hand experience with IB's customer service. If you like it, stay. If not, vote with your feet and find another broker to give your primary business to, while maybe keeping IB as a reserve. They have a wonderful selection of products, but as you see, there are strings attached...
Just my thoughts.
All the best!
Also, you have two wonderful lessons. First, know what you are trading and what can happen when. IOW, what is worst case? Don't be so impatient and don't get so greedy that you shoot yourself in the foot.
Second, you have now had first hand experience with IB's customer service. If you like it, stay. If not, vote with your feet and find another broker to give your primary business to, while maybe keeping IB as a reserve. They have a wonderful selection of products, but as you see, there are strings attached...
Just my thoughts.
All the best!
First, when you get a margin call then it simply means that your position size was way too big for the balance in your account. So don't be surprised what happened to you now... it was inevitable. Trading without proper risk management is simply gambling and has always the same output.Quote from pipepuller:
This tells me IB didn't fully understand the VIX product either, otherwise they would have required $100, $200 maybe $500 margin/contract right from the start!
Second, not your broker has to understand the different products but you have. It is your money on the line and therefore your responsibility. Don't blame the broker for your own mistakes.
It is sad that you lost your account but believe me you will never ever forget this lesson.
Sad to hear about your loss.
VIX options are a mystery to nearly all professionals, not that it's IB's fault but they should not be available to the retail investor until one of the exchanges can explain them coherently.
They are not based on the index, they are based on the futures and the pricing is very difficult to understand. You can have the front month priced higher than back months etc.
Stay away from them unless you really do your homework.
VIX options are a mystery to nearly all professionals, not that it's IB's fault but they should not be available to the retail investor until one of the exchanges can explain them coherently.
They are not based on the index, they are based on the futures and the pricing is very difficult to understand. You can have the front month priced higher than back months etc.
Stay away from them unless you really do your homework.
Quote from pipepuller:
In hindsight perhaps I was gambling more than trading. But for the past 6 months I was doing debit calendar spreads for a debit and realized there was something quite wrong when my short calls inverted past my long May/08 calls. So as you say, if IB wanted to truly protect itself and all of its clients then they shouldn't have been portraying a product as hedged when in fact it was not.
This tells me IB didn't fully understand the VIX product either, otherwise they would have required $100, $200 maybe $500 margin/contract right from the start!