how can we "lock" in margin fluctuation better??

I

IndyJonerJr

hi guys,

was asking this to some fellows, but seems got confused in translation.. I'm gonna try a simple approach but .....

-main goal: wanting to "lock" in available margin, mainly to "be smarter" selling and secondary to avoid exposure fees, and last to not go into a liquidation event...

-I'm trading credit spreads at the moment, and wondering an idea.. the idea is to take available margin to 25% of account ( to me an adequately safe zone ).. but I want to play it higher, as higher means more money.. I want to bump it to 40-50% available margin. I believe after this you go into exposure fees from IB..

My idea is to take that 25% available margin and keep the premium from selling put spreads. then for example to take available margin to 50% selling more put spreads.. we take that premium then, go and buy puts ATM or near the money.. in my head this tells me it will more balance the algorithmic system IB has in place using their 30% scenario. it would accomplish:

-leveling out the credit spreads as they are puts.. so if say ES starts going down, my purchased puts start going up balancing the plays, but obviously I have more sold puts then bought so this will buffer to an extent

-the goal is really for locking in margin, not making money, but you could make if you bought ATM, if you have a drop you could sell for more, but also you lose the benefit where you started out on was protection from margin fluctuation, but it would maybe work 30% of the time by my rough calculations...

-creating more money. the goal was to up the playing field more, and thus selling more put spreads, with the premium as I said you buy puts, this would most likely turn into having the bought puts expire worthless, which should... ??? turn them into wash sales converting that "protection" you set out to accomplish into lowering cost basis next round meaning you made more money..


hope you guys are still with me.... is this logical? dumb? smart? needs tweaked? wrong viewpoint? math is off?

any other plays you can do to lock in margin where you would ideally want it? I love credit spreads as they bring in more then naked for me, so if I can stick with credits thats where I'm at, but please shout out any suggestions, advice, experience, plays, skew the angle,

thanks
 
Robert, I've thought about it, but at IB, that's about three times less margin expense then another outfit.. also to some IB doesn't change closing out trades I believe which could then end up costing more in commissions, just depends how you play really with that I guess ( apparently green tax trader says this exposure fee is deductible but I don't know, haven't used them to file taxes???? )

so let me do a calculation real quick to see, as I have never actually calculated out exact range difference in fees would be vs. what you bring home. I'll be back with calcuation
 
IndyJonerJr said:
Robert, I've thought about it, but at IB, that's about three times less margin expense then another outfit.. also to some IB doesn't change closing out trades I believe which could then end up costing more in commissions, just depends how you play really with that I guess ( apparently green tax trader says this exposure fee is deductible but I don't know, haven't used them to file taxes???? )

so let me do a calculation real quick to see, as I have never actually calculated out exact range difference in fees would be vs. what you bring home. I'll be back with calcuation
More...

In a typical month, are you borrowing money to hold long positions?
Is this a Reg-T or PMA?

Credit spreads no not cause borrowing.

Bob
 
Bob, apparently I'm a complete dunce!!! I went from naked so that really makes no sense to me why credit spreads would be different in margin expenses?? but I loaded up and as you stated I have zero fees for month to date interest !!!

care to explain why that is? both are cancelling each other out??? I was never taught this so this is new to me that credit spreads don't incur margin expenses..

I'M REALLY HAPPY RIGHT NOW, hahahaha
 
the double dunce award.. I was completely unaware option had no borrow fees... apparently my account the way I looked at it was showing interest, and I took that to mean charges, not + interest ... and I was coming from another account borrowing so I just assumed options was the same, hahahaha
 
It is simple. Your account# at your broker has 3 accounts in the background: Type 1 cash, type 2 margin and type 3 short stock. If you have a cash account, everything should be in the type 1 account, so let's ignore that. For a trader with a margin account, your long stock, long+short options all go in your type 2 account. If that net debit balance is higher your liquidating equity overnight, you have to borrow money from your broker to meet that payment at settlement. Short stock in type 3 does not offset balances in type 2 as that money does not belong to you. It is from the sale of a security you did not own.

If you only trade options and they have credit balances, there is no borrowing involved as your have a credit from those sales in your account.

I get asked almost everyday, "why use Lightspeed vs another broker like IB, eTrade etc". Well I'm not going to give a list here but I will tell you that it adds value to have a person to ask these questions. Our support staff answer the phone when you call and response to emails. I make myself very available to my clients for those with accounts of $10,000 or $10mm.

Bob
 
thank you Bob,

I'm weary as I like to have a mobile app.. I was trained on mobile app as I was traveling around at the time, and seriously cannot even use IB on computer as there is too much going on, compared to the simplicity of an app... sounds stupid I know



I still want to find some answer to this question..

I've even thought to say buy calls in SPY, instead of ES where you purchased as it should mirror ES quite well... that should also solve for sure making sure it turns into a wash sale ( hoping to expire worthless to gain that protection and money back on it turning into a wash sale.. )
 
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