Agreed. I wish others would also understand the crux of my point. It's not the liquidation itself (as noted in my OP) but the lack of sophistication of the automated process in understanding the max value of the spread.
IB auto-liquidation
- Thread starter atrp2biz
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Agreed. I wish others would also understand the crux of my point. It's not the liquidation itself (as noted in my OP) but the lack of sophistication of the automated process in understanding the max value of the spread.
Yea, I have a hard time believing no one would snatch up a max loss spread before 55 cents in profit. The thing is any remedy you could possibly have would cost way more than what you have lost.
IB's system just treats every single options trade as separate trades when it comes to liquidation purposes, which can then spiral your account in certain market conditions. Again, I'd be very wary of trading anything with IB if using high leverage. They do not care about their customers when it comes to this.
IB's system just treats every single options trade as separate trades when it comes to liquidation purposes, which can then spiral your account in certain market conditions. Again, I'd be very wary of trading anything with IB if using high leverage. They do not care about their customers when it comes to this.
You would have most likely been filled at a price much better than 30. If I sold you the spread for 30, I would have a "free shot" of the stock falling below 960 at anytime before 430pm ct. For example if the stock falls to 459, I would by the stock and my 930 calls would be assigned and take it away from me, essentially buy the spread back for 29. Since I am long the 460 calls I would have the option to exercise these.
By selling the spread for 30, you are essentially buying the 460/430 put spread for zero. This is worth something, hence people will be willing to sell your spread for less then 30.
The only risk to me in selling you the spread, is if I by stock against the short calls and Amazon falls below 430 after hours, or if there is some other bad news that prevents me being assigned on my short 430 calls.
Again no issues with IB covering your risk here if you don't have enough margin to hold the stock, but their system should have entered the order as a spread.
By selling the spread for 30, you are essentially buying the 460/430 put spread for zero. This is worth something, hence people will be willing to sell your spread for less then 30.
The only risk to me in selling you the spread, is if I by stock against the short calls and Amazon falls below 430 after hours, or if there is some other bad news that prevents me being assigned on my short 430 calls.
Again no issues with IB covering your risk here if you don't have enough margin to hold the stock, but their system should have entered the order as a spread.
Let's remember that auto-liquidation is not done because somebody at IB was bored.
Autoliquidation means we out-wrote our account, for which IB is responsible in taking that account to the world. THEY are being the responsible party here -- not us.
Autoliquidation means we out-wrote our account, for which IB is responsible in taking that account to the world. THEY are being the responsible party here -- not us.
I don't think anyone will disagree with you. The OP should have covered these options earlier if he didn't have enough margin handle an assignment. IB should cover the position to protect themselves. But if they can do it in a manner that saves the customer money at no extra risk to themselves, shouldn't they do that?
You know, the greater point of my post was not clear -- it's morning, and of course there's lots going on. (That's my excuse: I'm stayin' wit' it.)
The thing is, it's not IB's call, to autoliquidate to our advantage or desire or prior-stated preference or whatever. It's just their call that we've fouled up, and they're going to send a notice ("Hey! Big Red Flashing Stuff Means Address Account Deficits!") and then 30 seconds or 5 minutes or 50[!!!] minutes later, they deal with it if we haven't.
(Not that I make a habit of this, but) I have seen IB buy stuff far away from the market, giving liability closer in a chance to "recover" cuz *surely* the market will be turning. And I have seen them take stuff right in the teeth of it, *just*as* the market was turning to make it all better. And I'm sure I've seen them take stuff by buying back shorts for a $1 that would become shorts for $1.75 two or three minutes later.....
My preferences each time would've been (in fact "were entirely") situation-specific. Portfolio-specific; *market*-specific. If IB has 10,000,000 accounts, of which 0.05% are sitting on the cusp of autoliquidation at any instant -- that's 50,000 accounts. In a market swing? Multiply that by 10.
If you were an IB shareholder, or an IB regulator, would you want them to be interrogating the specifics of each of those 50,000+ accounts, to find patterns, entirety of inventory, stated "Liquidate-last" columns, etc etc, to muscle through and find which of the current holdings to pluck first? Egads.
Their business is to mind their books; OUR business is to mind ours.
When your actions force someone else to take the wheel, don't bitch cuz they didn't take you home. (And, that'd be my point. Thanks for reading this far. I think I wuz writing to my younger self.....)
I agree with basically everything except for this. Just because IB has the right to liquidate, that doesn't give them the right to fuck you over in the process. Are people going to say that IB doesn't have the ability to program the liquidation in a way that recognizes defined risk option trades? They don't bother because they don't want to spend time on it and do not care. That fucks people over 100% and can cause more margin calls in a bunch of scenarios.
Main point is not that IB doesn't have the right to auto-liquidate. It's that they do not have the right to fuck people over just because they can. They can protect themselves without splitting up these orders.
Agreed -- and very much so. But still, who's taken advantage of whom?
To continue in the analogy to which you responded ("When your actions force someone else to take the wheel, don't bitch cuz they didn't take you home."), IB has no right to drive you to the county line and abandon you. But they *do* have every right, AND even the responsibility to IB shareholders and IB regulators, to drive you to *their* house, and abandon you. ("Us!")
And yes, that may trigger yet more "pain" on our parts. But ultimately, that's our bad, not theirs.
One thing my post above failed to convey was, that in some cases, I might've wished the autoliquidation to have been on an inside position fat with value, and in another case, might've wished the auto-L to have been in some 5¢ piece way out in the sticks, uselessly, *dumbly*, taking up margin. To an outside observer, the specifics might've looked to be the same, while to me, they might've been "*obviously* just so totally different!" Is that any of IB's business to figure out my psyche??? No.