Does IB take responsibility? An amazing story

[Option Trader]

Reply to Optioncoach:

The size of the spread depends on the liquidaty of the options. Orders placed as spreads tend to get very close to between bid and ask (i.e. for the legs that have a middle increment between bid and ask*)

IB is totally entitled to have leverage restrictions, and for a system-wide basis it is understandable; the issues were as I mentioned (e.g. the lack of providing of the information that would have put us on guard, the liquidation at sub net-liquidation value, and of the options that fed the problem instead of corrected the problem)

* BTW, additional time to liquidate/ close-out a position, would be of
tremendous benefit to the customer, as he can wait till there IS an
increment between the bid and ask on as many legs as possible, and get a
fill at fair prices. The savings can add up to mega-times the cost of
commissions for the trade.

 

[Don87109]

Quote from archimedes:

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?

My impression is that things can happen beyond your control that suddenly puts you in margin hell.

For example, if one side of a spread trade is busted you might find your self being liquidated willy nilly.

Don

 

[Profitaker]

Quote from archimedes:

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.

Trust myself ? WTF are you smoking ? Can’t you read ? Let me do baby talk – it means I can go take a crap in confidence knowing that my account won’t be desecrated by the time I’ve finished. If you’re an IB client and net short, you can’t, period.

Quote from archimedes:

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

No.

Let me spell it out for the hard of thinking…..

It means that when things go wrong, as they sometimes do, a good, well paid broker will earn his fee over and over. I make enough to afford a decent broker.

Ok, so with IB you save a nickel here, and a dime there, and then blow $$$ thousands because some computer program dumps on you when just 2 brain cells would have avoided it.

That is the crux of this thread !

You’re very welcome to IB.

 

[dis]

Quote from IBsoft:


Finally, if you believe that you have constructive suggestions as to how the liquidation software should be improved, I invite you to make them. While we can't promise to implement everything our customers ask for, we always carefully consider their suggestions in the hope that they may lead to improvements for all our clients.

OK. The code that calculates margin requirements is smart enough to aggregate legs into positions.

The automatic liquidation code, it appears, views one's account as an collection of unrelated legs. When it gets control, it randomly liquidates one or more legs and, in all likelihood, increases the account's margin requirements, which in turn triggers another round of liquidations.

May I suggest incorporating the code that aggregates legs into positions into the automatic liquidation program so that it can liquidate one multiple-leg position at a time.

 

[IBsoft]

Quote from dis:

OK. The code that calculates margin requirements is smart enough to aggregate legs into positions.

The automatic liquidation code, it appears, views one's account as an collection of unrelated legs. When it gets control, it randomly liquidates one or more legs and, in all likelihood, increases the account's margin requirements, which in turn triggers another round of liquidations.

May I suggest incorporating the code that aggregates legs into positions into the automatic liquidation program so that it can liquidate one multiple-leg position at a time.

We are working on that already. Thanks.

 

[archimedes]

Quote from Profitaker:

Trust myself ? WTF are you smoking ? Can’t you read ? Let me do baby talk – it means I can go take a crap in confidence knowing that my account won’t be desecrated by the time I’ve finished. If you’re an IB client and net short, you can’t, period.
No.

Let me spell it out for the hard of thinking…..

It means that when things go wrong, as they sometimes do, a good, well paid broker will earn his fee over and over. I make enough to afford a decent broker.

Ok, so with IB you save a nickel here, and a dime there, and then blow $$$ thousands because some computer program dumps on you when just 2 brain cells would have avoided it.

That is the crux of this thread !

You’re very welcome to IB.

Why would your account be "desecrated" while you are taking a crap? (Nice imagery by the way.)

What's amusing is your assumption that these "problems" just magically pop up, as if you had no control over their frequency and no idea when or how they might occur.

"Things going wrong as they sometimes do" means having your trades closed out by stops in place, or closing things out yourself. It does NOT mean being surprised by a margin call. A good trader almost never maxes out his full margin, and in any situation where margin is close to max, the trader would be watching closely anyway.

I have no dog in this fight... just found it amusing that you are such a fan of brokers and phone calls, when all they provide is hand holding for the trader who does not trust himself. (As you apparently do not, and rightly so, if you are prone to getting margin calls on the john.)

 

[archimedes]

Quote from Don87109:

My impression is that things can happen beyond your control that suddenly puts you in margin hell.

For example, if one side of a spread trade is busted you might find your self being liquidated willy nilly.

Don

But why would this happen if the account were adequately capitalized? Why is there ever a need to push the margin envelope?

If it's a question of maximizing return on capital, going with a full service broker defeats the purpose. The extra cost of commission, especially on spreads, would likely outweigh the interest foregone on a proper capital cushion in the IB account.

 

[Free Thinker]

Quote from archimedes:

But why would this happen if the account were adequately capitalized? Why is there ever a need to push the margin envelope?

If it's a question of maximizing return on capital, going with a full service broker defeats the purpose. The extra cost of commission, especially on spreads, would likely outweigh the interest foregone on a proper capital cushion in the IB account.

i agree. memories of 911 must have faded if some of you are maxing your margin on an everyday basis. its not smart.

 

[ktm]

Quote from vhehn:

i agree. memories of 911 must have faded if some of you are maxing your margin on an everyday basis. its not smart.

9/11? 1987 is still fresh in my mind.

 

[Profitaker]

Quote from archimedes:

Why would your account be "desecrated" while you are taking a crap? (Nice imagery by the way.)

Did you not know that margin requirements are constantly changing ? A large enough adverse move against you could trigger a crass auto liquidation, which costs an awful lot more than it could have had it been done by a human –be it yourself or your broker. Don’t be so smug as to think it couldn’t happen to you, however well inside total margin you trade – you never know what’s around the corner.

Quote from archimedes:

What's amusing is your assumption that these "problems" just magically pop up, as if you had no control over their frequency and no idea when or how they might occur.

Operating within margin isn’t a “problem”, not here, it’s a way of life.

Quote from archimedes:

"Things going wrong as they sometimes do" means having your trades closed out by stops in place, or closing things out yourself. It does NOT mean being surprised by a margin call.

It also does NOT mean being closed out by some sloppy computer algorithm.

Quote from archimedes:

A good trader almost never maxes out his full margin, and in any situation where margin is close to max, the trader would be watching closely anyway.

If you were close to max margin with IB you dare not take a crap ! Imagine that !

Quote from archimedes:

I have no dog in this fight... just found it amusing that you are such a fan of brokers and phone calls

I have no dog either, but merely suggested life beyond IB. I offered an alternative, another way of doing things, I believe a better way of doing things, for those that are interested. That you’re not makes no difference to me.