IB and incremental increase in Margins

[osho67]

I have received following e mail from IB. I cant clearly understand and why are they doing this. Comments much appreciated

Change in Margin for Short Out-of-the-Money Equity Index Future Options

Please note that, at 12:00 ET today, in addition to the exchange-mandated margin calculations, IB will begin to gradually implement options margin based upon +/- 30% moves in equity index futures products. In addition to the current SPAN range of 16 scenarios, IB will consider 2 additional scenarios of +/- 30% moves in the underlying and will begin to margin affected positions accordingly. This implies that there will be an increase in the margin on short out-of-the-money equity index future option positions. It has been determined that, based upon the positions in your account at yesterday's close and the market conditions and applicable parameters at that time, your account will be affected by this increase in margin. Please manage your risk accordingly.

Also, please note that, going forward, IB will be gradually increasing the margin required on short out-of-the-money options that fall within the +/- 30% scan range.




Interactive Brokers Customer Service

 

[osho67]

I am getting e mails from IB everyday about this

There has been 93 views and not a single reply.

Please help why IB is doing this I donot understand some portion of the contents as well

Thanks

 

[moonmist]

Quote from osho67:

I am getting e mails from IB everyday about this

There has been 93 views and not a single reply.

Please help why IB is doing this I donot understand some portion of the contents as well

Thanks

They probably think that the margin requirements set by the exchanges for shorting out-of-money options on index futures is too small. They have sent out six such E-mails since October 25.

The overnight margin requirements for shorting some of these options listed on CME have been increased by over 150% within the past 16 days.

 

[osho67]

The overnight margin requirements for shorting some of these options listed on CME have been increased by over 150% within the past 16 days.


I am trading Z (FTSE100) only which is on LIFFE exchange. Should I be affected?

 

[osho67]

IB is increasing margin requirement every day. My all positions are going to expire on this friday. It seems IB is not considerind decay of time value premium.

No body has any idea why IB is doing this?I have stopped any further trades because of these increments everyday. It seems no body is worried about this.

comments much appreciated,particularly from some IB representative. Thanks

 

[just21]

How many more margin increases will there be? I opened a ticket about this but did not get a reply.

 

[yip1997]

Quote from just21:

How many more margin increases will there be? I opened a ticket about this but did not get a reply.

Probably 20% margin increase since yesterday's morning. I checked my margin yesterday at around noon time. My margin (even the lookahead market) was fine, and the market went up meaning my naked put is a lot safer and so I didn't check after 2 pm. After the market closed, I checked the email and they said they liquidated my er2 740 put option at 4:01 pm at a price of $1.00. I believe IB has made tons of money from market making by forcing you to liquidate your position after market close.

 

[ids]

It is a completely different case. We corrected options margins yesterday in the middle of trading session because of a very big market move. Options risks were skewed quite a lot at the moment. While I understand your frustration, I would recommend you always check you margin before intraday switch off at 16:00 EST especially during such extreme margin conditions.

 

[ids]

Here is information on the topic. The margin increase will proceed to at least additional 1/2 of what you have now on short out of money option positions. Exact numbers are to be defined in future.

 

[yip1997]

Quote from ids:

It is a completely different case. We corrected options margins yesterday in the middle of trading session because of a very big market move. Options risks were skewed quite a lot at the moment. While I understand your frustration, I would recommend you always check you margin before intraday switch off at 16:00 EST especially during such extreme margin conditions.

The spot moved against my put, and IV dropped with spot going up. The weighting factor was increased and it caused the liquidation. There was no notice about the change in weighting factor till 3 pm. IB should inform the clients at least one day ahead if it is a planned strategy to reduce its risk, but the notice came randomly (not a planned one) when they saw they could take advantage of?! Is this IB's plan or way to screw its royal clients.