ib es option margin problem

B

black diamond

Is anybody seeing wierd margins on es options on IB? I am short a few OTM calls and the margins are about 140% of the margins on the es. I am not set up to calculate span margin, but I am pretty sure it can't be higher than the underlying!

I know I should contact them but I have had bad luck dealing with stuff like this at night and don't have much time to mess with it during the day right now.
 
Quote from sellingrich:

They have a HK branch, try the PM deal.
Or start a trouble ticket.
More...

Thanks for the reply. I tried an overnight PM before and they asked a whole bunch of questions and in the end said try back when the US is open. But I guess I will start a trouble ticket if it doesn't fix itself soon.
 
Quote from black diamond:

Is anybody seeing wierd margins on es options on IB? I am short a few OTM calls and the margins are about 140% of the margins on the es. I am not set up to calculate span margin, but I am pretty sure it can't be higher than the underlying!

I know I should contact them but I have had bad luck dealing with stuff like this at night and don't have much time to mess with it during the day right now.
More...

IB does allow you to check the SPAN margin online. If the calls are ATM or ITM, then the maintenance margin is the same for the ES futures, but you have to add the value of the call. OTM options have lower requirements, but you still have to add the value of the option. The basic margin (without adding in the value of the option) may exceed the exchange minimum for maintenance. I believe that brokers (FCM's) can set higher margin requirements. My broker, Global Futures, and the clearinghouse RCG, use SPAN margin and minimum exchange requirements. The current exchange minimum for ES futures is $4500 for initial margin and $3600 for maintenance margin. The further OTM you are, the lower the SPAN margin should be, but you have to add back in the value of the option.

If you want your own SPAN margin calculator, you can purchase PC-SPAN from the CME for about $500.00.
 
The thread-starter stated that the otm req is above overnight futures. I don't see how SPAN is going to help him. IB has been raising FOs margins.
 
I got around to talking to somebody at IB yesterday and thought I would share. They are really charging very high margins on es options, it was not a mistake.

On a short es 1415 april call (~50 pts otm) the initial margin is around $6800. Margin on the es is $4500 and the option premium is <$200. Even though I would lose more on the future for a given price move the margin is higher on the option. Maybe they think a delta < -1 is possible or are worried about VIX going to infinity?

He said they use span and then add an on top "house charge" that is discretionary. I asked if there is any formula or guidelines to figure out what the charge is and he said no. Just try different combination of options and underlying in TWS and see what happens. From eyeballing it it looks to be over $3k in this case.

I asked if there is any formula or any kind of notice policy for when they adjust their house charges. They said no. I said is it possible they will increase margin w/o notice and hit me with a margin call and they said yes.

WTF?! Do they really want to do business in es options?
 
Quote from black diamond:

I got around to talking to somebody at IB yesterday and thought I would share. They are really charging very high margins on es options, it was not a mistake.

On a short es 1415 april call (~50 pts otm) the initial margin is around $6800. Margin on the es is $4500 and the option premium is <$200. Even though I would lose more on the future for a given price move the margin is higher on the option. Maybe they think a delta < -1 is possible or are worried about VIX going to infinity?

He said they use span and then add an on top "house charge" that is discretionary. I asked if there is any formula or guidelines to figure out what the charge is and he said no. Just try different combination of options and underlying in TWS and see what happens. From eyeballing it it looks to be over $3k in this case.

I asked if there is any formula or any kind of notice policy for when they adjust their house charges. They said no. I said is it possible they will increase margin w/o notice and hit me with a margin call and they said yes.

WTF?! Do they really want to do business in es options?
More...

i noticed that too, writing otm naked contracts in IB requires significant margin. I just play around with the Check Margin button using a spread usually with the long contract 50 pt out of the short.

Pretty stupid, for example when ES was at 1300 with juicy vol, instead of writing a 1150 naked put, i wrote a 1200/1150 put spread due to margin requirement, even though the premium received for the 2 are the same and i think naked 1150 put is a much better trade due to the very strong support levels at/below 1200.

Not sure how you can get around this....
 
As I stated before, the broker/FCM (in this case IB is both) can set margin requirements HIGHER than the exchange. That is one reason I had to leave IB. Globalfutures follows exchange minimums; probably because they are guaranteed by RCG, one of the strongest and most capitalized FCM's in the business. Two weeks ago, I placed a short straddle. Initial margin was $4500.00 (exchange requiement) plus the value of the greater option (which was about 40 points times 50 for a $2,000 value). Total initial margin was $6500.00. Maintenance margin was $6000.00. So as you can see global follows exchange minimums for FOP's.
 
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