Call options - margin maintenance

T

toshiaki

According to IBs website on how they calculate maintenance, call options have a maintenance margin that should be the same as the your cost. That makes sense since you can't lose more than you put in. However, when I actually purchase call options, the maintenance margin is 5x the cost basis. So I purchased 3k worth of BA calls and the maintenance margin is 15k. This wasn't the case with my previous call/puts.

Anyone know what is going on here? I tried to contact support but I haven't had any reply in a few hours.
 
Could be due to position concentration.
May also depend on account type, and your other positions in that stock.
Here is just a paragraph from an IB document that may, or may not, relate to your issue:

“For Reg T accounts, IB increases the margin requirement for stock positions exceeding 1% of the published shares outstanding from its default margin requirement up to 100%. At 5% concentration, positions have a 100% margin requirement.”
 
Thanks. I don't hold any shares but I know that Reg T applies to equity options. I'm not sure how it works in my case. I discovered that if I sell naked calls, let's say for a 100 credit, I get 1k in maintenance margin returned to me.

I'll illustrate why it seems like a bug:

BUY BA 220 strike Call option - purchase for 6.6 (660 equity, maintenance margin required 3,300 per option)
SELL BA 270 strike Call option - sell for 1.1 (credit of 110, maintenance margin reduced by 3,500 per option)

Basically the only way to get my margin down to a reasonable level was to purchase corresponding far OTM call options. I don't see how it makes sense - adding the call option doesn't give me much credit nor does it reduce any risk.

So I sold calls to cover the call options that I purchased. I then tested what would happen if I sold naked calls on top of those vertical spreads. I discovered that I could further reduce my maintenance margin down. Each additional naked call would then reduce my margin down by 1,000-1,500 per naked call - and I could sell up to 10 naked calls to reduce my maintenance by 10k-15k (I forgot whether it was 10 or 15k). After the 10 naked calls, a higher number of naked calls would then raise my maintenance margin.
 
toshiaki said:
BUY BA 220 strike Call option - purchase for 6.6 (660 equity, maintenance margin required 3,300 per option)
SELL BA 270 strike Call option - sell for 1.1 (credit of 110, maintenance margin reduced by 3,500 per option)
More...


  • I think you are misreading something.
  • You only need $660 for the long calls. No margin above that required.
  • Something else is affecting the margin required - my guess is the short calls have a different expiry then the long calls.
 
toshiaki said:
Thanks. I don't hold any shares but I know that Reg T applies to equity options. I'm not sure how it works in my case. I discovered that if I sell naked calls, let's say for a 100 credit, I get 1k in maintenance margin returned to me.

I'll illustrate why it seems like a bug:

BUY BA 220 strike Call option - purchase for 6.6 (660 equity, maintenance margin required 3,300 per option)
SELL BA 270 strike Call option - sell for 1.1 (credit of 110, maintenance margin reduced by 3,500 per option)

Basically the only way to get my margin down to a reasonable level was to purchase corresponding far OTM call options. I don't see how it makes sense - adding the call option doesn't give me much credit nor does it reduce any risk.

So I sold calls to cover the call options that I purchased. I then tested what would happen if I sold naked calls on top of those vertical spreads. I discovered that I could further reduce my maintenance margin down. Each additional naked call would then reduce my margin down by 1,000-1,500 per naked call - and I could sell up to 10 naked calls to reduce my maintenance by 10k-15k (I forgot whether it was 10 or 15k). After the 10 naked calls, a higher number of naked calls would then raise my maintenance margin.
More...


I’m running into similar issues and have to constantly balance my margin, sometimes buying or selling otm options.
I gave up on figuring out how this works a long time ago, but now I feel a bit where I am and what I need to do with margin, and take advantage of it.
One issue you may run into though, your margin requirements may swing wildly overnight, and especially when nearing the expiration dates. Just watch what happens while trying to stay away from actual risk.
Of course you can try getting more info from IB, but each day the situation will be different and based on overall portfolio risk and position concentration calculated by IB. Not sure that even they can describe the details because they also change it as they please.
 
Those $220 BAs have been ITM for a day and a half, and IB is poking to insure that you have the capital available in case you have a lapse of attention and the options are exercised.

The $270s they couldn't give a rip about.

Think of it as "Headache avoidance." Could they liquidate post hoc? Sure. But they don't want your account in even a nanosecond of violation.
 
tommcginnis said:
Those $220 BAs have been ITM for a day and a half, and IB is poking to insure that you have the capital available in case you have a lapse of attention and the options are exercised.

The $270s they couldn't give a rip about.

Think of it as "Headache avoidance." Could they liquidate post hoc? Sure. But they don't want your account in even a nanosecond of violation.
More...

Right but I own those 220 BA calls so I make money when they're ITM.
 
OptionsOptionsOptions said:
  • I think you are misreading something.
  • You only need $660 for the long calls. No margin above that required.
  • Something else is affecting the margin required - my guess is the short calls have a different expiry then the long calls.
More...

IB has a function where if you click advanced before you trade it tells you what the effect of the trade will be on your margin. Similarly, after you have the position you can check the margin change of closing the position. The long position is most definitely not 660 only. I've sent a message to IB and I'll see what happens but it seems you agree that this is a bug.
 
Ib is ridiculous with margin calculation. Only platform that doesn't recognizer IC when you buy the legs seperatley
 
OptionsOptionsOptions said:
  • I think you are misreading something.
  • You only need $660 for the long calls. No margin above that required.
  • Something else is affecting the margin required - my guess is the short calls have a different expiry then the long calls.
More...

Unfortunately not - I finally got IB on livechat and they reviewed my account and confirmed that this is a bug. They've got the team reviewing the issue.
 
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