Gross Position Value vs. NLV

[TradeMachine]

Interactive Brokers apparently has a leverage cap based on a "Securities Gross Position Value" to net liquidation value ratio < 30, stated as follows:

Securities Gross Position Value <= 30 * (Net Liquidation Value - Futures Options Value)

https://www.interactivebrokers.eu/de/index.php?f=24862

I'm running an options arbitrage strategy that's not margin limited by standard stress tests, but has limited scalability due to this restriction.

Do other brokers, like Lightspeed, TDA, etc have similar rules?

 

[Robert Morse]

Yes. Most of the concerns over pin risk, but some of it is the dollar value of the position. It can cause higher requirements at the OCC causing a capital cost. 30X is on the high side. BTW, this only applies to equity/option PMAs with us, not futures.

 

[TradeMachine]

Yes. Most of the concerns over pin risk, but some of it is the dollar value of the position. It can cause higher requirements at the OCC causing a capital cost. 30X is on the high side. BTW, this only applies to equity/option PMAs with us, not futures.

Thanks Robert. This is very informative. Does this rule generally apply to institutional investors too?

 

[Robert Morse]

Yes, all PM Accounts. Wedbush calls it the leverage limit but it is calculated as GMV/Equity. I prefer to discuss these limits directly.

 

[TradeMachine]

Yes, all PM Accounts. Wedbush calls it the leverage limit but it is calculated as GMV/Equity. I prefer to discuss these limits directly.

is your Equity pretty close to NLV? and how GMV is calculated?

 

[Robert Morse]

GMV is the absolute value of all positions with no offsets.

 

[TradeMachine]

GMV is the absolute value of all positions with no offsets.

Then that's the same as IB's GPV.

 

[TradeMachine]

GMV is the absolute value of all positions with no offsets.

What's the maximum GMV/Equity allowed at Wedbush?

 

[Robert Morse]

I prefer to discuss these limits directly.