Having serious problems with IB

J

jgold310

This is the second time this happened. It happened last expiration day as well.

Here are my positions as of last night:

es 640 put - long
es 660 put- short


es 960 call -short
es 980 call -long

es 970 call -short
es 990 call -long

I have been holding these positions for 4 weeks and this morning IB comes and buys to close my 960 calls.
I got an e-mail saying I had a margin call (excess liquidity) and they closed the position.
What pissed me off is that the market was a lot higher and closer to my 960 calls a couple of days ago and I wasn't getting any margin calls. Now today (last day) IB comes and liquidate my position.

I called them and the guy said since it is too far out of the money, they think it is not going to be exercised so they stripped the options from my account.

When I asked to explain how I could avoid this again he basically didn't know how.
 
Sounds like IB has a bug in their SPAN margin calculation software that does it wrong on expiration day.

May ES 960 calls are worthless, so IB forced buyback to close makes no sense.

You could open a trouble ticket and see what strange explanation IB comes up with.
 
You may be able to get them to fix a glich but in my experience IB never admits to a mistake or error. I have never heard of any trader getting an adjustment in the trader's favor from IB.
 
I usually get out of my spreads the Monday before expiration. The last two periods (April and May), I allowed the options to expire. I keep a close eye on the margin requirements that week. They tend to shoot up a great deal the week of expiration, especially because of the bear call spreads (they have unlimited risk as opposed to the puts which can only go to zero). First, for all intents and purposes, theta has no effect. It is gamma that "runs the show." So, your maintenance margin and your initial margin rise to accomodate this situation. One way to avoid this is to have sufficient funds to cover the increased requirements. You have to keep an eye on the "account feature," which displays your margin requirements. The excess liquidity feature must be greater than zero at all times (I assume you didn't add any spreads during option expiration week). If the excess liquidity goes below zero, then you have to add enough funds to cover the initial margin requirements at the time. It is your responsibility to make sure you are covered. Once the excess liquidity goes below zero, IB will automatically close out trades to get the excess liquidity above zero. And sometimes, the executions are at horrible prices.

In the olden days, you would get a margin call from your broker. You would then have the option of adding more funds (they would actually give you time to wire funds before closing out the positions) or you can order the broker to close out the trades of your choice to meet the margin call. Conventional wisdom was to order the closeout instead of throwing good money after bad.
 
Quote from jwcapital:

I usually get out of my spreads the Monday before expiration. The last two periods (April and May), I allowed the options to expire. I keep a close eye on the margin requirements that week. They tend to shoot up a great deal the week of expiration, especially because of the bear call spreads (they have unlimited risk as opposed to the puts which can only go to zero). First, for all intents and purposes, theta has no effect. It is gamma that "runs the show." So, your maintenance margin and your initial margin rise to accomodate this situation. One way to avoid this is to have sufficient funds to cover the increased requirements. You have to keep an eye on the "account feature," which displays your margin requirements. The excess liquidity feature must be greater than zero at all times (I assume you didn't add any spreads during option expiration week). If the excess liquidity goes below zero, then you have to add enough funds to cover the initial margin requirements at the time. It is your responsibility to make sure you are covered. Once the excess liquidity goes below zero, IB will automatically close out trades to get the excess liquidity above zero. And sometimes, the executions are at horrible prices.

In the olden days, you would get a margin call from your broker. You would then have the option of adding more funds (they would actually give you time to wire funds before closing out the positions) or you can order the broker to close out the trades of your choice to meet the margin call. Conventional wisdom was to order the closeout instead of throwing good money after bad.
More...

Thank you. I decided to make my spreads narrower from now on, instead of 30 points I reduced them to 15 points. That should help. When I called IB they said the margin call was due to the delta. This excess liquidity is a pain. Do other brokers have this as well?
 
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