Getting around the special margin requirements

@guru Hey man. Thanks for your input. I will look into the Reg T rules, as you suggest. I am pretty sure the requirement is less that 100% though, for longs at least. I also understand that some brokers set margin requirements based of the stock's price, as you said. In the end, I don't really care how the margin requirements are set. I was just wondering if there's a way to lower them. I guess I can always call IB and try to talk to them about it. I doubt this is something they can adjust for individual clients though. Maybe they can inform me more on how their portfolio margin works, and why I don't see much improvement with it. Anyway, thanks for your help.
 
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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!
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lol there is no way that you have a Value at Risk figure of <1% unless you're trading odd lots. That's complete fantasy. Do you even know what the VaR represents? Your daily VaR is under 1%?

Go long or short the synthetic if you're holding overnights.
 
destriero said:
lol there is no way that you have a Value at Risk figure of <1% unless you're trading odd lots. That's complete fantasy. Do you even know what the VaR represents? Your daily VaR is under 1%?

Go long or short the synthetic if you're holding overnights.
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I hear you. I may have exaggerated a bit. I am trading odd lots though. Can you please elaborate why the lot size may matter risk-wise? More precise position sizing?

VaR is the lower 5% of the distribution of returns, right?

"Go long or short the synthetic if you're holding overnights." Tbh I have no idea what that means. Care to elaborate?
 
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nijshar28 said:
I hear you. I may have exaggerated a bit. I am trading odd lots though.

VaR is the lower 5% of the distribution of returns, right?

"Go long or short the synthetic if you're holding overnights." Tbh I have no idea what that means. Care to elaborate?
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If shorting; go long the x-put, short the x-call, same strike. Reverse for longs. IBKR will require less. It will also give you an indication on what HTB shares are costing you.

https://www.investopedia.com/articles/04/092904.asp
 
nijshar28 said:
@guru Hey man. Thanks for your input. I will look into the Reg T rules, as you suggest. I am pretty sure the requirement is less that 100% though, for longs at least. I also understand that some brokers set margin requirements based of the stock's price, as you said. In the end, I don't really care how the margin requirements are set. I was just wondering if there's a way to lower them. I guess I can always call IB and try to talk to them about it. I doubt this is something they can adjust for individual clients though. Maybe they can inform me more on how their portfolio margin works, and why I don't see much improvement with it. Anyway, thanks for your help.
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OK, so you're looking for better margin requirements. While I'm saying that your starting point should be the good knowledge of what those requirements are, why, and whether it's possible to make them better. I'm actually surprised you're shorting a lot of stocks without knowing much about how they're margined :)
But generally:

https://www.investopedia.com/ask/answers/05/marginaccountshortsell.asp
upload_2020-6-4_10-23-44.png


Here is TDA margin that I believe is very similar to IB (you can look that one up too):
https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD086.pdf
upload_2020-6-4_10-25-14.png



So basically I don't think you can do anything about margin when those are the rules for everyone.
Not sure whether other brokers can help either, while a paper account may not be going through a clearing firm to display and validate the actual margin requirements.
You may want to contact the other broker(s) with very detailed questions before/if you'd decide to move. You just need to start with a solid knowledge first.

(synthetics relates to options, but I don't think most of your stocks are optionable)
 
guru said:
OK, so you're looking for better margin requirements. While I'm saying that your starting point should be the good knowledge of what those requirements are, why, and whether it's possible to make them better. I'm actually surprised you're shorting a lot of stocks without knowing much about how they're margined :)
But generally:

https://www.investopedia.com/ask/answers/05/marginaccountshortsell.asp
View attachment 229786

Here is TDA margin that I believe is very similar to IB (you can look that one up too):
https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD086.pdf
View attachment 229787


So basically I don't think you can do anything about margin when those are the rules for everyone.
Not sure whether other brokers can help either, while a paper account may not be going through a clearing firm to display and validate the actual margin requirements.
You may want to contact the other broker(s) with very detailed questions before/if you'd decide to move. You just need to start with a solid knowledge first.

(synthetics relates to options, but I don't think most of your stocks are optionable)
More...

Hey. Thanks for all the info. I appreciate it.
 
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