Getting around the special margin requirements

N

nijshar28

IB requires increased initial and maintenance margins for some high volatility stocks, i.e. 100% initial and maintenance margins are required in lieu of the usual 50% and 25%, as per Reg T. In fact, I have seen a 500% short maintenance margin requirement for one particular stock.

I think I understand why IB does it. My issue is that even though I mainly trade these risky stocks, I construct my portfolio in a way that keeps its overall volatility very low, a daily VaR of less than 1%.

Given that the downside risk of my strategy is low, I really would like to lever it up. But I can't because of the special margin requirements for these stocks. I tried clicking "Try Portfolio Margin" in TWS but it doesn't seem to change things a whole lot (my excess liquidity increases by a few %, that's it). Anything else I can do? I really do not want to leave IB because their short inventory is so extensive. Any ideas? Thanks!
 
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Why do you think that Reg T margin is 25%-50% for shorting stocks?
Are you sure that different brokers will be able to give you better margin?
And are you sure that it's 500% margin on that one stock, instead of being based on the stock price?
And what is the price range of those stocks?
Are those stocks optionable?
 
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nijshar28 said:
IB requires increased initial and maintenance margins for some high volatility stocks, i.e. 100% initial and maintenance margins are required in lieu of the usual 50% and 25%, as per Reg T. In fact, I have seen a 500% short maintenance margin requirement for one particular stock.

I think I understand why IB does it. My issue is that even though I mainly trade these risky stocks, I construct my portfolio in a way that keeps its overall volatility very low, a daily VaR of less than 1%.

Given that the downside risk of my strategy is low, I really would like to lever it up. But I can't because of the special margin requirements for these stocks. I tried clicking "Try Portfolio Margin" in TWS but it doesn't seem to change things a whole lot (my excess liquidity increases by a few %, that's it). Anything else I can do? I really do not want to leave IB because their short inventory is so extensive. Any ideas? Thanks!
More...

IB is conservative (notoriously?) about margins. You're probably not going to be able to "get around" their margin requirements. If you want more leverage, suggest you look elsewhere.
 
guru said:
Why do you think that Reg T margin is 25%-50% for shorting stocks?
Are you sure that different brokers will be able to give you better margin?
And are you sure that it's 500% margin, instead of being based on the stock price?
Are those stocks optionable?
And what is the price range of those stocks?
More...

Hey thanks for your reply.

Tbh I am not sure what the Reg T margin for shorting is. Do you know?
No. But I think so. I tried Alpaca in paper trading mode. It seems to leverage these stocks fine.
Yes, I'm sure it's 500%. I do not know what it is based off. I just assumed it's volatility.
Prices for a lot of these stocks are low. But the special margin requirements are not based on price (at least not only price). IB has a separate special margin search page, where you can put in the ticker and it will tell you what the special margin requirement is (if any). If there is a special margin req., it is usually 100%, sometimes more.

I understand, IB is managing risk this way. I am just looking for a way to get around it, as the overall risk of my strategy is quite low.
 
Scataphagos said:
IB is conservative (notoriously?) about margins. You're probably not going to be able to "get around" their margin requirements. If you want more leverage, suggest you look elsewhere.
More...

Hey thanks for your reply. Do you know of other brokers with short inventories comparable to that of IB?
 
nijshar28 said:
Hey thanks for your reply.

Tbh I am not sure what the Reg T margin for shorting is. Do you know?
No. But I think so. I tried Alpaca in paper trading mode. It seems to leverage these stocks fine.
Yes, I'm sure it's 500%. I do not know what it is based off. I just assumed it's volatility.
Prices for a lot of these stocks are low. But the special margin requirements are not based on price. IB has a separate special margin search page, where you can put in the ticker and it will tell you what the special margin requirement is (if any). If there is a special margin req., it is usually 100%, sometimes more.

I understand, IB is managing risk this way. I am just looking for a way to get around it, as the overall risk of my strategy is quite low.
More...


What is the specific price of that stock with the 500% margin?
 
OK, so:

nijshar28 said:
IB requires increased initial and maintenance margins for some high volatility stocks, i.e. 100% initial and maintenance margins are required in lieu of the usual 50% and 25%, as per Reg T.
More...

It took me 1 minute to check on Google and this doesn't seem to be true. Do the same.


nijshar28 said:
In fact, I have seen a 500% short maintenance margin requirement for one particular stock.
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The margin is based on the stock price, while 500% is either an approximate or rounded margin requirement. It can be 1000% for stocks below $0.50, for example. Should be the same at most brokers.


nijshar28 said:
I think I understand why IB does it.
I really do not want to leave IB because their short inventory is so extensive. Any ideas?
More...

Although it's true that IB often protects itself more than other brokers, I'm not convinced that the margins you see at IB are different than Reg T, and/or at other brokers.
It took me another 2 minutes to check on Google that margins at TDA seem to be the same.


So basically I recommend that you spend a few minutes doing what I did: Googling :)
 
nijshar28 said:
IB has a separate special margin search page
More...


I've looked at that page in the past, and the margin rates shown there were no different than I could calculate in my head based on their (and TDA) rules. They were still based on the stock price last time I checked.
I guess IB may be providing that list for people bad at math :)
(though they may list exceptions as well)
 
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