ES options are not cash settled! ES futures are cash settled, but the options expire into an ES futures position if the option is in the money. For example if you had 1 itm weekly call option today you would end up buying one ES contract at the call price which you would now own over the weekend. Warning here, the margin for one ES contract is substantially higher than for your call option. Double warning, IB will look at your ES option positions up to 2 days before expiration and if they think you may expire itm and you don't have margin to buy/sell the underlying ES they'll start auto liquidating your account, no warning. Even if the option then expires worthless. The criteria they use to determine if your option will expire itm is a secret, customer service will just blame "the algorithm" that seems to run IB. I had a bunch of 5 point ES spreads auto liquidated this way, never traded ES with IB again.
How are ES (S&P500 mini futures) settled? Interactive Brokers.
- Thread starter lownetworthpers
- Start date
Wasn't close to a margin call at all, only positions in the account were vertical debit spreads on ES which are paid in full when you enter the position so I actually had no margin at all and lots of cash left over in the account. My margin in their dashboard showed $0. However if I'd exercised into the underlying ES I wouldn't have had enough to cover that, and on Thursday they started assuming that my spread would exercise, I wouldn't have enough money to buy the ES if it did, and so started selling off my positions. That's kind of lunacy given that they were 5 point spreads and there's no way to determine on Thursday that the markets going to close inside a 5 point spread two trading days later, hence their explanation that "the algorithm" made them do it. Reading up afterward it's common that they do this, and they do have contradictory language on their web site that in one place says they will do this and in another says they don't, so just wanted everyone else to be forewarned.