How do you manage your cash position with your broker?

T

taojaxx

Interactive Brokers got hit in the Oil futures debacle for $88Mn. No big deal -they have close to $8Bn equity- but it shows the potential risk for clients to run a large cash position with a broker should things get really bad for the broker: SIPC doesn't cover cash.
As I'm sure y'all know,running a futures position on a volatile asset entails your cash holdings to swell when the market goes in your direction, only to ebb when the market turns.
I manage this by investing excess cash in VGSH and liquidating the same fund if and when needed, to avoid my future position being "executed" as I have a large equity position in stable assets -VGSH-, while also avoiding excess credit risk on an uninsured cash position.
Drawback is I have to constantly monitor my account, which I think is a mistake: behavioral issues, plus I DO have a life besides this stuff: my trading horizon is weeks or even months, so no need to stay glued to the freaking screen.
I know IB has a "liquidate last" option that partly addresses the issue.
My question is Do they have a "liquidate first" option, which would be the appropriate solution? (Designate VGSH as "liquidate first".) Or do y'all have another process to achieve this?
TIA
 
Do you know whether a balance entirely invested in US T-bills enjoys slightly more protection than a pure cash position?

taojaxx said:
Interactive Brokers got hit in the Oil futures debacle for $88Mn. No big deal -they have close to $8Bn equity- but it shows the potential risk for clients to run a large cash position with a broker should things get really bad for the broker: SIPC doesn't cover cash.
As I'm sure y'all know,running a futures position on a volatile asset entails your cash holdings to swell when the market goes in your direction, only to ebb when the market turns.
I manage this by investing excess cash in VGSH and liquidating the same fund if and when needed, to avoid my future position being "executed" as I have a large equity position in stable assets -VGSH-, while also avoiding excess credit risk on an uninsured cash position.
Drawback is I have to constantly monitor my account, which I think is a mistake: behavioral issues, plus I DO have a life besides this stuff: my trading horizon is weeks or even months, so no need to stay glued to the freaking screen.
I know IB has a "liquidate last" option that partly addresses the issue.
My question is Do they have a "liquidate first" option, which would be the appropriate solution? (Designate VGSH as "liquidate first".) Or do y'all have another process to achieve this?
TIA
More...
 
FrankInLa said:
Do you know whether a balance entirely invested in US T-bills enjoys slightly more protection than a pure cash position?
More...
Sure does: it is a security position, hence it's not commingled with other clients holdings and it's protected by SIPC. Any security is, even a junk bond
 
1) I think in IB there is no "liquidate first" option, at least that was my conclusion the last time I looked into it.

2) SIPC covers up to $250k cash ($500k cash+securities) per account per brokerage. So a person could have an individual account and an entity account (and perhaps a joint account too) at the same brokerage, thus getting double (or triple) the cash protection, and then do the same at an additional brokerage. etc. :-(

3) Many/most brokerages buy additional insurance ("excess SIPC") to cover larger accounts. IB buys an additional $30M (but only add'l $900k cash) protection:
https://www.interactivebrokers.com/en/index.php?f=2334&p=acc

Even with IB's pretty good cash interest rate, to keep below the SIPC cash limit, I do the same as you do, hold a lot of "securities" that most people don't think of as securities:
https://www.sipc.org/for-investors/what-sipc-protects



taojaxx said:
Interactive Brokers got hit in the Oil futures debacle for $88Mn. No big deal -they have close to $8Bn equity- but it shows the potential risk for clients to run a large cash position with a broker should things get really bad for the broker: SIPC doesn't cover cash.
As I'm sure y'all know,running a futures position on a volatile asset entails your cash holdings to swell when the market goes in your direction, only to ebb when the market turns.
I manage this by investing excess cash in VGSH and liquidating the same fund if and when needed, to avoid my future position being "executed" as I have a large equity position in stable assets -VGSH-, while also avoiding excess credit risk on an uninsured cash position.
Drawback is I have to constantly monitor my account, which I think is a mistake: behavioral issues, plus I DO have a life besides this stuff: my trading horizon is weeks or even months, so no need to stay glued to the freaking screen.
I know IB has a "liquidate last" option that partly addresses the issue.
My question is Do they have a "liquidate first" option, which would be the appropriate solution? (Designate VGSH as "liquidate first".) Or do y'all have another process to achieve this?
TIA
More...
 
TooEffingOld said:
1) I think in IB there is no "liquidate first" option, at least that was my conclusion the last time I looked into it.

2) SIPC covers up to $250k cash ($500k cash+securities) per account per brokerage. So a person could have an individual account and an entity account (and perhaps a joint account too) at the same brokerage, thus getting double (or triple) the cash protection, and then do the same at an additional brokerage. etc. :-(

3) Many/most brokerages buy additional insurance ("excess SIPC") to cover larger accounts. IB buys an additional $30M (but only add'l $900k cash) protection:
https://www.interactivebrokers.com/en/index.php?f=2334&p=acc

Even with IB's pretty good cash interest rate, to keep below the SIPC cash limit, I do the same as you do, hold a lot of "securities" that most people don't think of as securities:
https://www.sipc.org/for-investors/what-sipc-protects
More...
Thanks, helpful response. Guess I'll keep doing what I'm doing now.
 
taojaxx said:
Interactive Brokers got hit in the Oil futures debacle for $88Mn. No big deal -they have close to $8Bn equity- but it shows the potential risk for clients to run a large cash position with a broker should things get really bad for the broker: SIPC doesn't cover cash.
As I'm sure y'all know,running a futures position on a volatile asset entails your cash holdings to swell when the market goes in your direction, only to ebb when the market turns.
I manage this by investing excess cash in VGSH and liquidating the same fund if and when needed, to avoid my future position being "executed" as I have a large equity position in stable assets -VGSH-, while also avoiding excess credit risk on an uninsured cash position.
Drawback is I have to constantly monitor my account, which I think is a mistake: behavioral issues, plus I DO have a life besides this stuff: my trading horizon is weeks or even months, so no need to stay glued to the freaking screen.
I know IB has a "liquidate last" option that partly addresses the issue.
My question is Do they have a "liquidate first" option, which would be the appropriate solution? (Designate VGSH as "liquidate first".) Or do y'all have another process to achieve this?
TIA
More...
In these days of zero commission, many brokerages pay very little in interest on your cash position. You should sweep all your cash into a money market fund which is then protected by the security law. When you need the money to trade, you can sell enough from the money market to cover. The money market pays much better interests. Last year, my Schwab MM account paid >2% interest rate. Cash ~.1%
 
That's exactly what the OP says he does with VGSH, but he doesn't want to pay close attention to his account.... Does Schwab (or any other broker you know of) have a "liquidate first" tag for those money market funds (or any security)?


ironchef said:
In these days of zero commission, many brokerages pay very little in interest on your cash position. You should sweep all your cash into a money market fund which is then protected by the security law. When you need the money to trade, you can sell enough from the money market to cover. The money market pays much better interests. Last year, my Schwab MM account paid >2% interest rate. Cash ~.1%
More...
 
TooEffingOld said:
That's exactly what the OP says he does with VGSH, but he doesn't want to pay close attention to his account.... Does Schwab (or any other broker you know of) have a "liquidate first" tag for those money market funds (or any security)?
More...
Exactly, that would be ideal.
 
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