How to read this margin impact on IB

[Amahrix]

Thank you Amahrix,

How does a short option short term and long option long term combo make money ? I presume it will initially a debit ? and then the Long option needs get ITM for the spread to make money ?

Below are relevant clickable links with more detail:

Long Diagonal Spread with Calls

Long Diagonal Spread with Puts

Short Diagonal Spread with Calls

Short Diagonal Spread with Puts

 

[HobbyTrading]

Hi guys,

I am trying to do a credit spread trade on the IB trader workstation paper trading account and got this as margin impact. How do I read this - what is the margin required ? Is it the first column or the second column or the third one that shows the margin required to do this trade ?

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Thank you

The initial margin for this trade is 904. The maintenance margin for this trade is 723. The left hand column shows your account's margin requirements before this trade is executed. The right hand column shows the account's margin requirements if this trade were executed.

 

[HobbyTrading]

Below is a example trade scenario that I am trying and the margin window when I try to submit this. Is it possible to find which column is the margin column based on this ?


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View attachment 205681

The initial margin of the trade is 1055. The maintenance margin of this trade is 844.

 

[zdave83]

I am not sure what a naked spread is - but I have posted the trade example above.

Its not a naked spread because the Jul31 Put covers extreme downside. However when it expires you would be left with a naked Put if no other action is taken. I have some experience with Diagonals at IB and thought I'd pass this along. Assuming this is the only position in your account, hypothetically, meaning there is nothing else covering the Sep short Put ... you should know that IB's risk model will start flagging the position and significantly raising margin requirements on Jul31 and probably the day before. IB advised that this is done to alert the account owner that their position is about to become high-risk as the short term option in the Diagonal expires and leaves the longer-term short option "exposed". If you have other positions in your account that cover the longer-term short option then you may not experience this.

 

[traderwald]

The initial margin for this trade is 904. The maintenance margin for this trade is 723. The left hand column shows your account's margin requirements before this trade is executed. The right hand column shows the account's margin requirements if this trade were executed.

Hi Hobbytrading, Thank you for the reply.

I am a bit confused about "initial margin" and "margin requirements" in your message. What is the definition of these terms ? Sound identical to me .. Do you mean that Left and right hand column show what the margin would be if the margins on the existing positions in the account are added up to the new trade ?

Thank you

 

[HobbyTrading]

Hi Hobbytrading, Thank you for the reply.

I am a bit confused about "initial margin" and "margin requirements" in your message. What is the definition of these terms ? Sound identical to me .. Do you mean that Left and right hand column show what the margin would be if the margins on the existing positions in the account are added up to the new trade ?

Thank you

"futures initial margin" and "futures maintenance margin" are specific terminology related to futures trading. I'm not sure what the official definition for each of these is, but you probably can find it if you Google it. The initial margin applies during the first period after you have bought the futures contract. After some time the initial margin requirement changes into the maintenance margin requirement.
At IB for example you will even find four margin requirements for a futures contract: "initial", "maintenance", "initial overnight" and "maintenance overnight". You can find their overview here: https://www.interactivebrokers.com/en/index.php?f=26662