How are maintenance margins applied?

Grantx said:
This is news to me. I have an account with IB and also with Dorman. My preference is IB because my funds are held locally here in the UK and protected up to 50K. The money I have with Dorman is not protected and it worries me a bit.

Under what scenario would they increase my margin? What did they do to you cdcaveman?
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What they have done to many people... When the market goes against you and volatility goes up typically the bed in the ass spread goes pretty wide and makes it very hard on you.... If you have that all taking into account and then interactive brokers increases your margin by 50%above exchange minimums which you haven't taken into account then they Auto Liquidators you at the very worst prices it can kind of piss you off..... This is what has happened to many people not just me so I would recommend if you're using them to consider that your margin requirement might be doubled and especially when volatility goes up and you need to march in the most
 
Yeah that would piss me off too. So if Im in a CL position and things get wild and Im down $600 with no more funds to cover the $1200 margin, then they could simply liquidate the position saying that I had insufficient margin requirements?

What else do they do that I should be aware of?
 
yes.... they aren't your typical broker.. A typical broker will call and email you and give you a day to fund your account to cover... which more then likely will give you time to add funds and as well for the market to calm enough for you to actually cover it... what i've told you is exactly what you need to be aware of... IB auto liquidates... you will just be flattened... They do notify you but not enough time to do anything about it.. you will get liquidated at the very very worse price i can guarrantee you that... I actually was trading CL spreads when it happen to me...
 
its alwasy good to ask questions , as most traders can tell you what not to do... that is where you will learn the most.. from other peoples blow ups.. at least i have and continue to.. IB is deep discount and has a ton of products to trade... you can't get that with alot of other brokers...
 
Grantx said:
IB has 4 margin categories:

1. Intraday Initial
If you want to open the position during the opening hours of the exchange, the initial intraday margin needs to be covered

2. Intraday Maintenance
To hold the position during the opening hours of the exchange you need to covert the maintenance margin

3. Overnight Initial
If you want to keep the position overnight you need to be able to cover the overnight initial margin right at the close of the exchange.

4. Overnight Maintenance
If you want to hold it after the close you need to be able to cover the overnight maintenance margin

So all of them apply to you if you open the position during the day and want to stay in the position overnight.

Lets use CL as an example. If I enter a single contract position during the day which I intend holding overnight then is the following correct:
I first need the intraday initial = $1500.
Then I need the intraday maintenance = $1200
Then the overnight initial as the exchange is closing = $3000
Then overnight maintenance as my position is held into the close = $2400.

So I need to have the sum of all those margins in my account to hold a single overnight contract= $8,100?
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Call IB and ask them specifically what you will need for each contract. If they cannot give you a straight answer, find another broker perhaps. *shrugs*
 
Initial is what you have to have to open the position. Maint margin is where you are booted out/auto liquidated. You can always add more $ as your melt down nears the maint level.

Look for the button 'check margin' in the order entry window under advanced - this shows the initial & maint margins required.

CL (Light sweet crude oil)
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I did speak to IB. My first post contains the text from the live chat. For some reason i wasnt getting it (forgive me I can be very slow at times). But then these two sentences cleared it up for me.

comagnum said:
Initial is what you have to have to open the position. Maint margin is where you are booted out/auto liquidated
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Thanks for the help. I know it sounded like a daft question but im not concerned with that, if I dont know ill ask :D
 
Grantx said:
I know it sounded like a daft question but im not concerned with that, if I dont know ill ask :D
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It certainly isn't a daft question. It took me also some time to understand it. And, going by the amount of online tutorials at YouTube, there must be a vast audience for this topic.
Next exercise: suppose you bought a contract CL on day 1 and kept it on day 2 and into day 3. During day 3 you buy one more contract CL. What margin (in USD) will be required from you at the end of day 3 and going into day 4?
 
HobbyTrading said:
Next exercise: suppose you bought a contract CL on day 1 and kept it on day 2 and into day 3. During day 3 you buy one more contract CL. What margin (in USD) will be required from you at the end of day 3 and going into day 4?
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Going by Mr. Gumby's post of CL margin from IB, it would be $5,624 (Initial = $2,812*2), and then you factor in the net worth of the open position.

So if you had $10,000 in the account at the start, and at end of day 3 you had two open positions at the entry price, your maintenance for those positions would be $5,624.

At the end of day 3, if your open position is down $2,000, you would need $7,624 to cover the margin. Since you had $10,000 in account at the start, your net liquidating value would be $10,000-$7,624. That is $2,376 left as a "buffer".

When they decide to "auto-liquidate" is up to them. Ask the broker directly for a straight answer. Straight answers are never guaranteed though. :-(

P.S. Would just like to point out that at the CME, initial margin is 10% above maintenance. That means that at maintenance of $2,250, the initial is technically only $2,475 per contract. That IB is tacking on an extra ~$350 per is something they are doing, not something they are required to do.
 
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