IB-- 4:1 buying power... not really

M

mars

I talked to IB quite a bit this morning about this 4:1 buying power thing... they sent out an email earlier in the month saying that they were reducing their inital margin requirement to 25%... it's not really true...

the equation works like this:

buying power = (equity-initial margin requirement)*4 where initial margin requirement is 50%

an example of the ramifications (as explained to me) is:

if you have 50K in equity, no stock positions, under your current method (as described to me) you can buy 200K in stock

if you have 50K in equity, but just bought 50K worth of stock, you can buy 100K more worth of stock.

If you have 50K in equity, and have 100K worth of stock, you have no buying power.

****
does this make sense to anyone? means you can't scale into a position, etc (at least, not with 4:1 margin).... i think it stinks.
 
hmmm,
i rec'd internal mail this AM but did not read it in great detail so I could have my facts wrong. What I understood was that once defined as a pattern day trader, you would have 25% margin requrement until 3:55 PM that day.
 
that's what i thought as well...

but two different people on the phone explained the situation that way to me....

(i currently haven't daytraded under these new rules-- i don't have buying power because I'm holding positions on margin)

it has the consequence that you can't daytrade two stocks at the same time with 4:1 also.... i hope that this isn't the case...
 
If IB would ONLY add a column for "buying power" this would end ALL confusion, even if they don't calculate buying power the way other brokers do.

BSAM
 
i agree.... it doesn't seem like it would be hard for them to do either...


edreyfus calculates their new buying power as (equity-maintenance margin)*4.... makes more sense than what IB has described
 
Datek offers 4:1 buying power to all margin accounts, even for those with less than 25k.

The calculation of daytrading bying power at Datek is as follows:
[75% of the Long Stock Value (LSV) - 130% of any Short Stock Value (SSV) + Cash] x 4

It would be nice if IB displays the buying power, like Datek and other brokers, so we don't have to go manually through the calculation process prior to entering an order.

Fohat
 
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