Extremely High Margin Requirements on Back Months - Interactive Brokers

comintel · May 11, 2013

Quote from atticus:

The position can cause the account to trade debit if you were to cover the short straddle and then miss the cover on the wings -- assuming the trade was traded to the limits of the account and at the debit-req. Say the wings implode before you're filled. Obviously much worse things can happen between covering the wings and then the body.

That is true also.

stock777 · May 12, 2013

Quote from jones247:

I'm sorry guys, but I just don't buy it... since when did any broker, particularly IB, start looking to protect the customer from losing money, or even blowing out their account???.... If that's the case, then I guess we can all assume that our respective brokers will always be there to keep us out of risky trades that can wipe us out.. "Yeah Right"... again, I'm not buying the "we are saving you from yourselves" argument as a justification for the disallowance. Otherwise, there are several other instances where the broker should have stepped in and saved the trader from devastating losses!!!

They are trying to save themselves from getting stiffed by deadbeats. You wouldn't know anyone like that , would you?

traderslair · May 13, 2013

What are good alternatives for iB ?

There are practically none for retail traders options. Sure, you have TDAmeritrade TOS but their commission cost is practically DOUBLE that of IB.

1245 · May 13, 2013

Quote from traderslair:

What are good alternatives for iB ?

There are practically none for retail traders options. Sure, you have TDAmeritrade TOS but their commission cost is practically DOUBLE that of IB.

For futures, there are plenty of FCMs to choose from. The big difference is that IB does not charge for their platform but most FCMs offer broker neutral platforms that have a cost such as CQG.

newwurldmn · May 13, 2013

Quote from atticus:

OK, I thought it was an iron condor. You can trade natural flies and iron condors in equity index markets. Take it from long experience that the SPX is much better in terms of edge loss on complex orders. So trade the SPX unless you're after the tax benefit. I'll add that it's my experience that the edge loss is greater in the ES which mitigates the tax benefit, IMO.

Not terribly indicative; but quote a 100-wide ES call or put fly and then quote the same strike fly in the SPX. The SPX fly will show a market, the ES will not.

There are more guys than I can count that have been burned in back month futures. It's best to steer clear of trading derivatives of derivatives with complex orders.

IB is being conservative. Inhibition through excessive haircut. Great idea and I applaud them for protecting ourselves from ourselves.

What tax benefit? I thought both es options and spx options are 1256 contraxts

comintel · May 13, 2013

Quote from 1245:

For futures, there are plenty of FCMs to choose from. The big difference is that IB does not charge for their platform but most FCMs offer broker neutral platforms that have a cost such as CQG.

It is not too hard with most brokers to negotiate commission 50 cents, plus platform fee 50 cents for CTS T4, for example, for a total of $1.00 (plus fees).

This is slightly more than IB $0.85 cents (plus fees) but fairly close. Later with higher volumes, the cost can be brought down further.

To get the commission down to 50 cents, ask any futures broker to match the published fee structure of Deep Discount Trading. Many/most will or come close.

traderslair · May 13, 2013

I'm talking about options of course.

luisHK · May 13, 2013

Quote from traderslair:

I'm talking about options of course.

deep discount trading and crossland have been cited (and DDT praised) numerous times on this forum, they both offer FOP. And Monster offers cheaper stock options than IB, although I'm not sure wether they pass on (or charge) rebates. IB also costs me more than many brokers because of the per share fee when trading stocks.

As I need to fund my account from overseas, i'd rather limit the wire and intermediary bank expense but if you don't have this issue it might be worth opening different brokerage accounts for futures/stocks/options

comintel · May 13, 2013

Quote from traderslair:

I'm talking about options of course.

The fees for a futures option are the same as for the underlying future.

Pretty well all futures brokers do both.

Brighton · May 13, 2013

Comintel - When you were shopping around for a new broker that gave better margins on futures options, did you have difficulty finding one that matched or exceeded IB for:

1. Risk reports - daily margin, stress test, VaR (the three reports you can run in IB Acct Mgmt)?

2. Portfolio Analysis - canned and custom reports over any time period?

3. "Connectivity" for lack of a better term. Free or low cost API to Excel and a large enough customer base that firms like TradeLog (taxes) will tailor their applications to IB?

4. Something equivalent to IB's Risk Navigator? It may have improved since you left IB -- it now displays Greeks on individual options in the portfolio > then by the contract month > then by the commodity > then by the asset class. The design and colors suck, but it provides a lot of information.

In addition to costs, the items above are important to me and I think IB does a good or good enough job with them. However, as time goes on and my accounts grow, that margin issue is going to be a real thorn.