IB calendar spread margins on options (puts) for CLG16 and CLH16

B

B Johnson

IB call centers closed...

Why did IB liquidate my account? I had a net liquidation value above the maintenance margin! I had a calendar spread where both options were increasing in value and then out of nowhere they buy back the front month short options at a huge loss...WTF!?!?

I'm assuming the answer is that they use equity with loan value to determine margins and not net liquidation value...which defeats the whole purpose of calendar spreads and having low margins, totally illogical. I called and they said that FOPs have no cash value LOL! Is this just IB's BS or is this industry wide...wtf...
 
B Johnson said:
IB call centers closed...

Why did IB liquidate my account? I had a net liquidation value above the maintenance margin! I had a calendar spread where both options were increasing in value and then out of nowhere they buy back the front month short options at a huge loss...WTF!?!?

I'm assuming the answer is that they use equity with loan value to determine margins and not net liquidation value...which defeats the whole purpose of calendar spreads and having low margins, totally illogical. I called and they said that FOPs have no cash value LOL! Is this just IB's BS or is this industry wide...wtf...
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Just ib...never heard of this anywhere else. Ib just don't give a fuck.
 
I actually asked them that and they said even if it was say a short 40 put and a long 41 put ON THE SAME MONTH, then because FOPs do not have equity with loan value, then they do not count toward margin requirements. So if the short option became ITM an extra 2k and the long option increased in value an extra 2.5k, then I would need to have an additional 2k in my account...
 
Yeah absolutely retarded way of running a margin system. IB seriously needs to get its act together and stop it with this nonsense. They obviously dislike something about options, counterparties, and the potential one couldn't close out the option I guess. The way they're handling things is irrational.

Also aren't FOP gains/losses marked to market anyway? Surely a gain on the long side is adding to account equity?
 
Where did you go caveman? This is my only broker I've been to and I just started trading futures options... are other places like this does anyone know?

And no, fop gains do not add to equity with loan value, only net liquidation value, which apparently isn't even used for margins
 
debitspread said:
Dozens of threads on ET about IB auto-liquidation, dating back years. But ETers open accounts there anyway, then act shocked!!! when they get liquidated.
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They're shocked because most people don't think to search of "totally irrational liquidation" AND "Interactive Brokers" before opening an IB account. Or they didn't know ET existed until they opened an IB account, were the recipient of a totally irrational liquidation, and did a google search for it and stumbled onto ET.
For the OP, one trick I've learned when opening spread positions is to immediately enter a GTC order at the max value of the spread as soon as you open your position. For example, if it is a 5 point SPX spread, enter an order for that same spread at $0 or $+5.00 depending if you're doing a debit or credit spread respectively. The problem is their liquidation routine is not programmed to understand that you can't lose more than $5 on a 5 point SPX spread for example, so if the bid/ask spread goes wide and the best debit/credit is less than $0/greater than $5, their computer uses that as the current "value" of your position and you get liquidated. If you put in an order right at the min/max value of the spread, their computer sees that as the market value, since it's now the NBBO, and prevents the spurious liquidation. You'll probably never have to worry about getting a fill at that price (I have once), but if you do you're just out commission on the 1 share you put out there. Its ridiculous that you have to do this, but until you find a substitute broker it should work for you.
 
I swear this should be a sticky if ET had stickies. Who the fuck takes the other sides of the forced liquidations at obscenely low low prices? Hmm..I wonder? Tommy Hilfiger LLC? Tim Hortons LLC? Something like that.
 
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