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Has anyone tried to borrow from a box spread with Schwab?
- Thread starter tonyf
- Start date
This is looking very interesting:
IBKR is a no go for this - but I wonder if anyone has first hand experience doing something like that at Schwab?
Box Spreads work well in IBKR. Robinhood banned it. Selling Box Spreads on Eurostoxx50 even pays you to borrow Euro.
Box Spreads work well in IBKR. Robinhood banned it. Selling Box Spreads on Eurostoxx50 even pays you to borrow Euro.
can you walk me through the mechanics of doing that with IB?
First, you need to convert your IBKR account to Portfolio Margin. You need to put much more than the minimum $100K equity requirement.
On IBKR mobile app's watchlist look for SPX. Click Options. Scroll to desired date you wish for the tenor of the loan (the longest for now being Dec 14, 2023). Turn on the Strategy Builder at the bottom so you can see what you choose. Scroll on the option strike price to determine the desired width of the box (amount of the loan) e.g. 4000 - 5000 (1000 distance x 100 = $100,000.- loan to be paid back at the expiration date)
On 4000 strike price
1. Click Ask on the left side : Buy 1 4000 Call
2. Click Bid on the right side : Sell 1 4000 Put
On 5000 strike price
3. Click Ask on the right side : Buy 1 5000 Put
4. Click Bid on the left side : Sell 1 5000 Call
Add these transactions to your favorite Watchlist. The SPX 4000 - 5000 Box will be shown with the corresponding Bid and Ask and including how many contracts on offer (1 contract is $100k). Try to sell the contract (or as many contracts desired) on the Box as high as possible to reduce the interest that you will be paying (ie. should be higher than the Bid and lower than the Ask). Remember you will repay $100k x the numbers of contracts, by the end of the term. Please also remember how much equity value you have when trading the amount of the loans/contracts and also that you will need to repay those loan at the end of the term.
Please post what you have accomplished. You may want to try on a simulated account.
You should ditch your Schwab account.
On IBKR mobile app's watchlist look for SPX. Click Options. Scroll to desired date you wish for the tenor of the loan (the longest for now being Dec 14, 2023). Turn on the Strategy Builder at the bottom so you can see what you choose. Scroll on the option strike price to determine the desired width of the box (amount of the loan) e.g. 4000 - 5000 (1000 distance x 100 = $100,000.- loan to be paid back at the expiration date)
On 4000 strike price
1. Click Ask on the left side : Buy 1 4000 Call
2. Click Bid on the right side : Sell 1 4000 Put
On 5000 strike price
3. Click Ask on the right side : Buy 1 5000 Put
4. Click Bid on the left side : Sell 1 5000 Call
Add these transactions to your favorite Watchlist. The SPX 4000 - 5000 Box will be shown with the corresponding Bid and Ask and including how many contracts on offer (1 contract is $100k). Try to sell the contract (or as many contracts desired) on the Box as high as possible to reduce the interest that you will be paying (ie. should be higher than the Bid and lower than the Ask). Remember you will repay $100k x the numbers of contracts, by the end of the term. Please also remember how much equity value you have when trading the amount of the loans/contracts and also that you will need to repay those loan at the end of the term.
Please post what you have accomplished. You may want to try on a simulated account.
You should ditch your Schwab account.
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You should ditch your Schwab account.
why?
for milking as much possible from its unaware customers: i.e. charging 7-8% margin interest rate at 0% cost of funds, and other trade manipulations (e.g. excessive commissions on a plain vanilla high-yield corp bond trades). They might as well screw you on such box spread trades.
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can you walk me through the mechanics of doing that with IB?
Remember this? you asked exact same question last year.
https://www.elitetrader.com/et/threads/cheaper-financing-than-ibs-margin-rates.341064/page-6
You should be an expert by now.
Remember this? you asked exact same question last year.
https://www.elitetrader.com/et/threads/cheaper-financing-than-ibs-margin-rates.341064/page-6
You should be an expert by now.
Of course I do, it is on the top of my mind.
But most fear doing this with IB, per the Reddit link I posted above.
Having several bad experience with Schwab, I am not positive if Schwab would let you trade better on a box than with IBKR. More expensive is a likely yes.
I would think that you should not have the exact same but opposite legs on two boxes in your account. They may cancel each other and cause problems. Choose completely different strike prices & expiry dates for different boxes.
I would think that you should not have the exact same but opposite legs on two boxes in your account. They may cancel each other and cause problems. Choose completely different strike prices & expiry dates for different boxes.