Did IB get freaked out so it still holds 100% intraday margin in some markets?

[pcvix]

Thanks, OldTrader, for your clear examples and well-reasoned conclusion.

Quote from OldTrader:

Really this involves two separate questions:

1) What intraday margin does IB need to protect itself
2) What intraday margin does the customer need to protect himself.

...

So I think the answer here is that IB is requiring more intraday margin for many of these contracts than is necessary for their protection. On the other hand, given the volatility no responsible trader needs more. So, to my way of thinking, this is almost a moot question. IB asking for more than they need, but the trader should be trading with more anyway...probably more than IB asks for.

OldTrader

 

[tortoise]

Quote from kiwi_trader:

Sierra Chart will now run with a wide range of brokers.

What was interesting was that when each new one arrived there were people waiting eagerly to take them. And then there was a honeymoon period of warm statements and praise. And finally, maturity and the problems come out.

All brokers have problems.

And, no doubt, a percentage of their customers are wankers and twats. Although IB do seem to get more than their fair share.

so i ib is, by your own admission, for wankers...sierra charts is, by my observation, for wankers...

and we know that kiwi -- as with any furry fruit -- is wanky as hell.

hmmm....

 

[kiwi_trader]

LMAO ... and a tortoise really can't do better than that. Weak.

 

[tortoise]

Quote from kiwi_trader:

LMAO ... and a tortoise really can't do better than that. Weak.

actually, i finished you off a couple of posts ago, but i guess you're too much of wanker to notice. g'day, mate...

 

[kiwi_trader]

LOL.

Not even close.

 

[Tums]

Quote from Trader_Herry:


...
IB please seriously consider whether there is any necessity to hold 100% intraday requirements, or even raise intraday margin up to 100% again next time. Don't forget you have a real-time monitor and you will liquidate our positons instantly once we fall short of margin. Your risk is already lower than even those of the conservative brokerage but why are you still being so paranoid about it?

YOu shouldn't trade if you don't have 200% overnight margin.

 

[Trader_Herry]

This poll is pretty strange. You cannot really affect our corporate policies this way. Instead you are using it to make several incorrect statements.
We do not liquidate immediately. There is 10 minutes grace period.
We do not liquidate when market is shallow in general.
We do not liquidate even if we like to liquidate some positions if there is no correspondent offer. This situation could be ugly if market moves fast.

Thanks for your reply.

However you still haven't responded to my questions raised in the thread:
- why does IB think it is still necessary to hold the 100% intraday margin requirements? Is it because there aren't as many traders as those who traded E-mini S&P so IB doesn't care to change back?
- why does IB think IB will be in danger if IB gives 50% intraday margin?
- Why can those less prudent (but not too aggressive) brokerage still survive even without taking some of the strictest measures like IB does? Why?

Regarding the "liquidate positions once you fall short of margin", this statement is simply taken from your official website (the page which explains how margin works). IB calculates initial (new position) and maintenance margin requirements on a real-time basis. IB will liquidate positions on a real-time basis if there is a maintenance margin deficiency.

To be more specific, yes IB will wait a bit when we slightly fall short of margin. However if the situation become worse, IB will liquidate our orders. There is no waiting nor any margin call. (Correct me if I'm wrong)

After all it is still very short wait time comparing to many brokers who can wait much longer and still they can keep themselves safe. It still doesn't change the fact that keeping 50% intraday margin can still keep your firm safe.

I hope IB can explain why IB has to be so conservative about margin requirements.

 

[Trader_Herry]

What if the market is down? What if GLOBEX or ECBOT gets overwhelmed with orders and crashes (ECBOT crashes every time I sneeze loudly)? Just a thought...I'm not sure 100% margins are needed in all markets, but if this truly affects you then you're really just one adverse market event from wiping out anyway.....

For people who keep giving an example which show higher margin requirements may be helpful, you need to distinguish between two issues:
A: I want to cover EVERY potential risk (no matter how small the chance of the risk to occur) in the margin policy
B: I want to cover most risks (all common and major risks, leaving a few rare or minor risks) in the margin policy

If what you are trying is to achieve goal A. 100% intraday margin is definitely better than 50%. I would even say 100% is still not enough. Perhaps 200%, 500% or 1000%. The more margin you charge, the safer you are.
However, if you need to cover every single and potential risk before you are willing to take an action, you'd better forget it.
The world is full of risks. You have to face risks all the time when you do business.
Take the insurance company as an example, what if a successive of your clients of life assurance dies?
Should it raise your premium by ten-fold to protect us from this doom just in case?

The same applies to the margin case. Leverage always involve a risk as a matter of fact (because you can lose more than you bet). Theoretically you can fully protected only if you are charged the full value of a contract. Anything can happen.
The question is not how you can be protected from all risks no matter how rare or minor it is. The question is how much protection is deemed sufficient. Let me rephrase the question so people can get it easily:

Provided that:
- IB doesn't make any margin call in whatever case
- it will liquidate your positions once you fall short of margin
- this is equal to placing a non-cancellable market stop far before your margin has any chance to be exhausted
- all are done in real-time, up to the second

Don't you think 50% intraday margin is already sufficient enough to keep a brokerage very safe?

(If you ask me, I will say 33% is still more than enough although I would foresee people who start getting busy frightening themselves about potential scenarios which can wipe them off. To me, I even place a much tighter stop so I will be flat long before my margin is down to the level of the maintenance margin)

 

[Trader_Herry]

YOu shouldn't trade if you don't have 200% overnight margin.

the trader should be trading with more anyway...probably more than IB asks for [that is more than 100% of margin]

Most of the complaints about margin come from the same folks that Gamblers Anonymous attempt to cure.
(horse racing image)
No margin at the track either, you risk $2, you put up the deuce.

OK, I would like to take this opportunity to point out a common misconception made by many people here.
Well I believe many people are traders (some of them may be daytraders too).
But if you try to ask this question to the general public, what responses would you receive?
1. Is trading gambling?
2. Is daytrading suicidal?
3. Is it okay to buy a stock that you know nothing about the company?
4. Would you treat trading as a career?

For an outsider:
1. LOL. You risk $2, you put up the deuce.
2. That's for blinds or idiots.
3. Haven't you heard of the advice from the SEC?
4. Do you think gambling is a career?

For a real trader:
1. Trading is just a game of calculated risks
2. If you ask an experienced daytrader, he even told me daytrading is one of the least risky trading style (WOW! Oh no!).
3. Why bother? The stock chart is what I need.
4. Yes, trading is a free career.

You can't learn everything. Your knowledge is definitely much more limited than what you can learn in the world.
It is wrong to use your own ruler to judge the right's and wrong's of everything in the world.
Since you don't know or can't see how such and such can work, it doesn't mean it can't be worked, let alone using this as a rule to judge someone must be stupid or silly if he attempts to do it.

Any trader should have 200% overnight margin before one should trade?! Are you freaked out by the large gaps recently?
Try to give this advice to a scalper and see how he reacts.

Horse betting is definitely gambling?! Is it because you don't see there is any way to know who is the winner?
Try to give this advice to a seasoned horse better and see how he reacts.

A famous trader said "stock market is no different from a casino".

 

[Trader_Herry]

Quote from kiwi_trader:

I for one am glad you've gone Tortoise. Can you take some of the twats, whingers, and wankers with you please?

Quote from kiwi_trader:
LMAO.

I didn't classify you as a wanker. But I am happy to now classify you as a twat.

No nerve struck. I just get a bit of fun from baiting twats like you.

And I repeat the wish that you take your fellow wankers and twats with you.

Good riddance

Quote from kiwi_trader:
LMAO ... and a tortoise really can't do better than that. Weak.

Do you have some basic Internet manners? I don't know why you, kiwi_trader, is so addicted to name calling and personal attacks (search for his history for tons of examples).

No post is aggressive but you react so fiercely and talk like an immature child who has no room to accept opposing opinions.

I feel sorry about the guy receiving hate PMs because of a reply here. The person who sent hate PM is immature and childish.