Futures and Stocks in One Account

B

bignatty

I know IB allows futures and stocks in the same account. How does this work with margin?

For example, say you wanted 110% equity and 110% 10 Year Treasury exposure through futures (ZN). Knowing that the treasury futures require cash as collateral, how does this work? In order to get to 110% equity you will run through all cash that could be used as collateral for ZN.

The only way I can think to accomplish this is to open a separate account for the futures portion, where I could segregate the cash collateral, and go into margin in the other account for the 110% stocks.

What am I missing?

Thanks.
 
When you trade anything, say futures, IB will allocate some of your equity to the "commodity" portion and leave the rest to the stock/equity portion. So you have only limited buying power. When you place a new order, IB will calculate future margins on the fly. It won't allow you to place new orders if the new margins are not adequate.

It is easy for IB. Not sure if E*Trade and Schwabs do the same thing if you have a combined account.
 
bignatty said:
What am I missing?
More...
What you're missing is that IB does not require cash as collateral for the margin of the futures contracts. IB evaluates your total account value (so-called net liquidation value, NLV) and allows you a margin loan based on this NLV. So IB lends you the cash needed for the collateral. IB will charge you a debit interest on this loan.
Of course does this only work if you have a margin account with IB. If you have a cash account then this does not work.
 
HobbyTrading said:
What you're missing is that IB does not require cash as collateral for the margin of the futures contracts. IB evaluates your total account value (so-called net liquidation value, NLV) and allows you a margin loan based on this NLV...
More...

This.
 
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