The options were liquid, the type that all markets almost always bid the same.
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Does IB take responsibility? An amazing story
- Thread starter Option Trader
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The options were liquid, the type that all markets almost always bid the same.
Let's stop this "Poor me, IB liquidated my positions in the worst way so they could steal my $11k...".
Sound ludicrous? It is. Would IB risk their $2 billion company to steal your $11k? No.
Plain and simple - you violated IB's stated margin requirements and got closed out. IB didn't call first? That's not their model. Never will be.
Take some responsibility for trying to cut things too close and not knowing all the rules. Move on. Get another broker. Case closed.
Sound ludicrous? It is. Would IB risk their $2 billion company to steal your $11k? No.
Plain and simple - you violated IB's stated margin requirements and got closed out. IB didn't call first? That's not their model. Never will be.
Take some responsibility for trying to cut things too close and not knowing all the rules. Move on. Get another broker. Case closed.
Hello riskarb,Quote from riskarb:
You're certain IB was counterparty on your box liquidation? What ticker was traded? This is easily vetted.
If you can't keep enough cash to cover your haircut then you've no business trading boxes. I've seen 10-point boxes on liquid names swing as much as $.50 to $1.00 based upon the 4-way market. The fact remains your "partner" is responsible.
It seems you joined us in the middle.
To your first question: Review the communication with Def. Since you and Freehouse brought it up, I think it is a wise idea to verify 100%. If it is true, IB didn't have to liquidate the positions, they could have just confiscated the account!
To your second point: To catch you up to speed, the issue was not WHETHER or not action should have been taken, rather WHAT and HOW. The liquidation to be allowed must achieve its purpose. The liquidation did NOT achieve its purpose, rather just wiped out equity.
Is IB allowed to liquidate in an irrational way, unlike other brokers, because it is done with software that doesn't speak english?
Also, my partner specifically asked IB to send any info they have about the limitations.
Quote from Don87109:
So you would prefer that IB willy nilly sell out your positions. Makes a lot of sense.
Your preposterous rational suggests an ulterior motive and, therefore, I feel compelled to tell you that your words will not earn you any virgins in the hereafter.
Don
to make it clear to you, the customer is not entitled to phone call.
i knew beforehand that someone would only look at the first part of statement. a formula for liquidation is the least discriminatory methodology and avoids favortism especially to those people who think or imply that because of the size position they are deserving of special consideration.
my concerns here are evenness of treatment and the financial viability of IB or whoever i deal with. there is zero ulterior motive I certainly have little sympathy for those who do not understand the possible results of theior actions.
as to the virgins, i prefer them right here on earth. i will leave those in the hereafter to others.
Reply to Choad:
With exception to Riskarb who joined in the middle, but generally tries to understand things properly and think rationally, I don't know where you are coming from or what you're trying to achieve by hoping IB get preferential treatment over other brokers for errant liquidation that did not benefit them with protection and only hurt the customer.
With exception to Riskarb who joined in the middle, but generally tries to understand things properly and think rationally, I don't know where you are coming from or what you're trying to achieve by hoping IB get preferential treatment over other brokers for errant liquidation that did not benefit them with protection and only hurt the customer.
Quote from zdreg:
the case that the positions were sold out"willy nillY" has not been proven.
Recap:
A $2k cash shortage existed, which parallels $100k GPV (not $500k GPV). 100 options and 50 box spreads would have covered everything by a human doing the liquidation. IB knows that. The software continued liquidating again the next business day as well.
(BTW, in your own terms, I don't know why the need for that review course.)
The only case that liquition versus GPV could be 50:1 is by a box spread. 50:1 is a delicate balance, so the legs must be chosen by a human, not by software, which IBj said cannot be programmed.
Quote from Option Trader:
Hello riskarb,
It seems you joined us in the middle.
To your first question: Review the communication with Def. Since you and Freehouse brought it up, I think it is a wise idea to verify 100%. If it is true, IB didn't have to liquidate the positions, they could have just confiscated the account!
I believe that you have the right to the following:
"Name of the other party, time of execution and remuneration furnished on request."
***********************
I think the point you may want to raise is why the boxes were not unwound as a combination instead of leg-by-leg. That would most likely give you better liquidating fill.
Quote from IBj:
Please don't misquote me....
By definition, if you make the position smaller, assuming no other changes, the ratio of position to netLiq will be smaller and more likely to be compliant. This is basic math.
How can your algorithm assume "no other changes"/ all else equal--when the whole goal is to reduce GPV with the fewest possible options sold at market? It is as simple as having the software find the legs with the highest price options, so that when liquidation occurs at below net liquidation value, you have made the maximum reduction in GPV relative to loss of account holder equity.
I am not a programmer, but is that not simple stuff??
For IBj and Def:
Here is the paragraph of the e-mail sent to IB making a specific request for information that would have pre-empted everything:
"Can you be more specific regarding your findings regarding box spread limitations by forwarding to me any information you may have? The person who answered for the OCC was not aware of any such thing when having tried to call them."
What are your comments?
Here is the paragraph of the e-mail sent to IB making a specific request for information that would have pre-empted everything:
"Can you be more specific regarding your findings regarding box spread limitations by forwarding to me any information you may have? The person who answered for the OCC was not aware of any such thing when having tried to call them."
What are your comments?
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