Help explaining margin requirements on CSP (IBKR)

W

wxytrader

From their website for naked puts:

100%* option market value + maximum (((Percentage based on underlying statutory margin requirement* (underlying market value) - out of the money amount), 10%* strike price, $250* number of contracts). Short sale proceeds are applied to cash. Underlying statutory margin requirement above is 15% for broad based index options.

So I assume the stock I am selling puts on has a margin rate that needs to be applied. If so where can I find that rate on IBKR? On tos it ranges from 0% loan value up to 75% loan value.
 
wxytrader said:
From their website for naked puts:

100%* option market value + maximum (((Percentage based on underlying statutory margin requirement* (underlying market value) - out of the money amount), 10%* strike price, $250* number of contracts). Short sale proceeds are applied to cash. Underlying statutory margin requirement above is 15% for broad based index options.

So I assume the stock I am selling puts on has a margin rate that needs to be applied. If so where can I find that rate on IBKR? On tos it ranges from 0% loan value up to 75% loan value.
More...
FYI: CSP and NakedPut are different animals (regarding collateral)... :) What you have quoted is that for NakedPut, IMO, not for CSP.
IMO the margin rate (or whatever) of the underlying stock does not play any role for these two options strategies.
 
Quanto said:
FYI: CSP and NakedPut are different animals (regarding collateral)... :) What you have quoted is that for NakedPut, IMO, not for CSP.
IMO the margin rate (or whatever) of the underlying stock does not play any role for these two options strategies.
More...

Yeah I specified CSP to the agent and that's what he came back with. On TOS they don't even allow cash secured puts on certain stocks ie like MARA...apparently on IBKR there are no such restrictions according to the agent..so just trying to figure out the margin rates for MARA for example.

Like for IWM (TOS) it's .70 so when I sell 1 put @193 strike, my buying power only drops by $5790. For MARA on TOS, the loan value is 0% so would basically be all cash, but they also have a restriction as mentioned so you can only trade spreads. I imagine the loan value is 0% so will be all cash, but will confirm with agent.
 
Last edited:
Best is to test it with some cheap test trades to learn how their system calculates by making screenshots before and after each important action, and then analysing the changes and making notes... I really learned many things that hard way! :-)

The brokers are terrible with their information or handbook (if avail at all) when it comes to such important details of the trade. I can tell you: every single cent is important for the outcome, ie. whether one makes profit or loss.
 
Quanto said:
Best is to test it with some cheap test trades to learn how their system calculates by making screenshots before and after each important action, and then analysing the changes and making notes... I really learned many things that hard way! :)

The brokers are terrible with their information or handbook (if avail at all) when it comes to such important details of the trade. I can tell you: every single cent is important for the outcome, ie. whether one makes profit or loss.
More...

I just tried and it won't put any trade or preview through because I don't have the minimum $2500 cash required to be on margin. I opened up the paper trading account but nowhere to place a trade to test it...will have to add more funds.
 
wxytrader said:
I just tried and it won't put any trade or preview through because I don't have the minimum $2500 cash required to be on margin. I opened up the paper trading account but nowhere to place a trade to test it...will have to add more funds.
More...
Too bad. I'm sorry for you. I would recommend switching your margin acct to a cash acct.
In my CA I don't have any such MinLimits. nor any MarginCalls nor PDT shaet.
As said, CC and CSP is possible in CA, and as I understand it, you too are trading mainly those.

Btw, my scanner shows many interesting trades with DTE=4 that give more than 10% :)
Let me know if interested and your acct allows to trade again.
 
Last edited:
ok I got the numbers
Quanto said:
Too bad. I'm sorry for you. I would recommend switching your margin acct to a cash acct.
In my CA I don't have any such MinLimits. nor any MarginCalls nor PDT shaet.
As said, CC and CSP is possible in CA, and as I understand it, you too are trading mainly those.

Btw, my scanner shows many interesting trades with DTE=4 that give more than 10% :)
Let me know if interested and your acct allows to trade again.
More...

Ok I got the numbers.

Net Liquidity
2,507

Buying Power
8,357

So I am getting 30% loan value on high volatility options. That's great, I am only getting 1:1 on tos, and they have restricted selling even CSPs on a bunch of them.

btw why don't they rename margin to cash collateral when it comes to placing a trade?

And instead there should be a spot or cash account, and a credit account. Get rid of the word margin entirely from economics. I guarantee nobody, even D really understands what margin is...its completely ambiguous. It has too many meanings...profit margin, margin requirement, margin maintenance, margin for error, margin on a piece of paper.

So a conversation would look like this: "Hey Bob are you trading on a cash or credit account? Oh nice, what is the interest rate of your credit account? Oh I think about 6%. Oh nice, what about your collateral requirement? That depends on the instrument...it usually ranges from 30%-50% for more volatile stocks. Oh so if your collateral drops below 30% on a risky stock then you have to add more cash to your account? Yep."
 
Last edited:
wxytrader said:
ok I got the numbers


Ok I got the numbers.

Net Liquidity
2,507

Buying Power
8,357

So I am getting 30% loan value on high volatility options. That's great, I am only getting 1:1 on tos, and they have restricted selling even CSPs on a bunch of them.

btw why don't they rename margin to cash collateral when it comes to placing a trade?

And instead there should be a spot or cash account, and a credit account. Get rid of the word margin entirely from economics. I guarantee nobody, even D really understands what margin is...its completely ambiguous. It has too many meanings...profit margin, margin requirement, margin maintenance, margin for error, margin on a piece of paper.

So a conversation would look like this: "Hey Bob are you trading on a cash or credit account? Oh nice, what is the interest rate of your credit account? Oh I think about 6%. Oh nice, what about your collateral requirement? That depends on the instrument...it usually ranges from 30%-50% for more volatile stocks. Oh so if your collateral drops below 30% on a risky stock then you have to add more cash to your account? Yep."
More...

Lol correction I have a 70% loan value (LTV), or a 30% cash collateral requirement. So basically I can finance 70% of my trades even on these higher volatility options.
 
wxytrader said:
Lol correction I have a 70% loan value (LTV), or a 30% cash collateral requirement. So basically I can finance 70% of my trades even on these higher volatility options.
More...
You sure you need such a loan/margin?
IMO it would be better if you could do w/o it :)
B/c I'm afraid it could create other problems soon... :-(
CashAcct is king, man! :)
 
You must log in or register to reply here.
Back
Top