Does IB take responsibility? An amazing story

[ktm]

Quote from Option Trader:

It takes a lot more time to not handle the issues, as it is with a lot of things in life.

That would be true if it were an issue. Since you refuse to take responsibility for your own actions, you still seem to be missing the point that this problem you brought upon yourself is not an issue.

The points concern fellow Elite Traders, or there would not be over 6,000 views in just a few days.

The views are due to your grandstanding and selacious titling of the thread. I have read very little support for your core problem of using too much margin and failing to understand the margin policy of your broker.

 

[Option Trader]

People's input noted, a couple of good observations, several not-so-good points.

All I know is IB said they would respond, and haven't yet. They are capable of responding in public or in private forum, and if/ when they issue a response that makes sense and is reasonable (even without money), the issue is over.

 

[Option Trader]

Quote from ktm:

Quote from Option Trader:

The views are due to your grandstanding and selacious titling of the thread. I have read very little support for your core problem of using too much margin and failing to understand the margin policy of your broker.

What you said about the title doesn't explain repeat views by Elite Trader.

If you had the same problem you would be concerned, because you could then see how it affects YOU. I am quite sure there is something else (aside from this one) you don't understand that actually might also affect you some day...Good Luck!

 

[dis]

Quote from IBj:

No, the checks are made prior to each liquidation cycle. The example shows why the GPV ratio is repeatedly violated when there is a change in a mxiamlly leveraged portfolio. As the position value changes due to the unfavorable marks resulting from market orders, the maximally allowed position value declines at a rate 50x bigger.

If so, perhaps you could explain why the program liquidated the last out of 200+ positions. Was that because prior liquidations widened the box 200-fold, r because the account value dropped below $20 (assuming a 10-point box)?

 

[Profitaker]

Quote from zdreg:

5th this kind of thread brings out the hand holding deprived individuals who want hand holding +the lowest commissions..

I want to be given an opportunity to resolve my margin requirement myself. A heads-up telephone call is all it takes. If that fails then having an experienced dealer liquidate in an orderly and cost effective manner is what I want. And guess what…. I’m happy to pay for it ! A decent broker is worth his weight in gold. Personally I can’t afford cheap brokers.

Quote from zdreg:

6th are the individuals who come out of the woodwork who think that if they violate the monetary requirements in the account they should have the same amount of time to meet their obligations as a broker with substantially more capital and lines of credit.

No I didn’t say the “same amount of time” but highlighted the fact that IB could, if they so wished, allow some leeway – 10 minutes / 1 hour / close of business / whatever.

In this life you get exactly what you pay for, and if you're happy with what you've paid for then fine.

Nuff said.

 

[freehouse]

Quote from IBj:

An interesting fact was uncovered as a byproduct of this thread.

IB's margin for box positions on american exercise options is too low. We are requiring only the strike differential, which is fine for european exercise options but lower than the cost to close the position which is the minimum that should have been charged.

The difference is not trivial. The estimated margins should be 5-10% higher depending on the contracts in question. We will fix.

This had no contribution on the event that is the source of this thread but it is a perfect example of why we have the GPV 50:1 limit. Without this limit, traders would be able to put on infinitely big positions since the cash generated by the box sale would be bigger than the margin required to hold it.

It seems like some people recognized this and leveraged their capital as far as we allowed. I am extremely happy we have a GPV algorithm as a safety net.

I believe that you should recheck the margin needed for the American style short boxes. Under the CBOE Margin Manual (see attached) page 34 there is an example for both American and European style short boxes. In this example, only the difference in strikes is needed as margin and not any additional amount.

 

[archimedes]

Quote from Profitaker:

I want to be given an opportunity to resolve my margin requirement myself. A heads-up telephone call is all it takes. If that fails then having an experienced dealer liquidate in an orderly and cost effective manner is what I want. And guess what…. I’m happy to pay for it ! A decent broker is worth his weight in gold. Personally I can’t afford cheap brokers.

So basically you don't trust yourself to stay within posted margin requirements, and you are willing to pay extra for someone to keep a friendly eye on you.

"Can't afford cheap brokers" is perhaps better translated as "can't trade without supervision," no?

 

[IBj]

Quote from freehouse:

I believe that you should recheck the margin needed for the American style short boxes. Under the CBOE Margin Manual (see attached) page 34 there is an example for both American and European style short boxes. In this example, only the difference in strikes is needed as margin and not any additional amount.

That is correct. CBOE rules assert the minimum, not the maximum. The true cost to close out the position for american option boxes can be greater than the strike difference and a proper risk mgmt approach would require the position holder to have at least as much money as would be required to close the position.

 

[freehouse]

Quote from IBj:

That is correct. CBOE rules assert the minimum, not the maximum. The true cost to close out the position for american option boxes can be greater than the strike difference and a proper risk mgmt approach would require the position holder to have at least as much money as would be required to close the position.

Agreed. The minimum is the difference is strikes, but brokerage firms can charge additional margin if necessary.

 

[El OchoCinco]

Especially since the ask to buy the box back is usually more than difference between the strikes if the box is close to full value. In other words a $10 box might have a bid/ask of $9.50/$10.50 so to close at market it will cost you more than $10 to close since no one can guarantee a fill in between. So if IB is forced to liquidate or close it out, they would have to do so at the market and would require you to pay more than the BOX value. So this cushion covers that scenario I assume.

Quote from freehouse:

Agreed. The minimum is the difference is strikes, but brokerage firms can charge additional margin if necessary.