IB Horror Story
- Thread starter ozzie_bozo
- Start date
Knowing whether or not an assignment has been made could be beneficial not simply because of liquidation risk but for other reasons. Here is one:
For example: having a conversion/reconversion on and an assignment takes place - this will generally reduce your margin requirement but also leave you long an out of the money option and if you knew that the assignment took place then you could at least attempt to sell it in the marketplace.
Looks like the original poster split. I did a google search and found it at http://groups.google.com/group/misc.invest.options/browse_thread/thread/4547258b5204313a - it's a Usenet reposting of a Terry's Tips newsletter.
yo:
I didn't take the time to consider that my cut-and-paste job might stimulate a decent-sized thread, or be seen as stirring a pot.
This was my own fault, due to a lack of circumspection on my part.
I cut-and-pasted that post as an afterthought while I was checking out a communique from Terry's Tips. I was surfing around in a hurry, and jamming through e-mails, and thought I'd throw that cut-and-paste up for the heck of it, and move on to other stuff.
Mistake.
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Nothing wrong at all with IB
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I fully understand and endorse the rationale behind IB's policy regarding treating assignments. IB gives you the tools and the responsibility and the low, low prices. It's up to the trader to handle these things. If the trader gets slaughtered by the chain saw, then the trader has some more learning to do. It's not the chainsaw's fault.
I like that policy. Sink of swim on your own merits. No hand holding. Good stuff. If you need training wheels, pay for them. IB doesn't sell training wheels.
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That post I put up on these boards was originally in a Terry's Tips communique, The tone of the communique was to intended to make IB seem less appealing, for, I believe, the following reason:
I am all-but-certain that the reason Terry of Terry's Tips doesn't recommend IB, even though it is cheaper per contract than Think or Swim or OptionsXpress is because Terry gets remuneration in some form from Think or Swim and OptionsXpress that he wouldn't get from IB. When he is saying he is recommending the VERY BEST brokerages he has found, I don't think he is telling the whole truth. I believe he is recommending what is, in many cases, NOT the very best deal for his clients, in order to butter his bread, is my reading (though, certainly, think or swim and OptionsXpress are among the best around). I am basing this assessment on an e-mail I received from him quite some time ago when I asked why in the world wouldn't he recommend IB, especially for the smaller-time traders, given that IB was cheaper per options contract. His e-mail back said in so many words that IB didn't pay him enough to recommend them. The tone of the e-mail wasn't so bald as that, but that was the gist, was my read.
Possibly that communication is somewhere on my computer. Perhaps I should try to dig it up.
Possibly - POSSIBLY - I am misunderstanding Terry's thinking and motivations. However, certainly, many trading advice providers feather their nests by recommending less-that-optimum brokers, while not telling their customers that, by using the recommended broker, they are, in effect, paying a hidden vig straight to the website operator. This badly undermines any claims these websites operators may make or imply that they are out to make their customers maximum money.
One example:
I don't know about nowadays, but a number of years ago, Underground Trader pushed a brokerage that, as far as I could see, charged many times what other comparably quick brokerages would charge. Jea Yu, the proprietor, might get in a defensive red-meat rage about this assertion, but, c'mon, give me a break. (Or, maybe he would calmly cop to it...? He'd earn my respect if he did.)
An aside:
Notice that when a person or entity gets all in a huff and an outrage and DEMANDS an apology, it is very often because what they are saying is ain't worth the paper it's printed on. Think of how the radical Muslims are flipping out over some dime-store political cartoons. They're flipping out because they feel so very weak, trying to uphold an untenable position. On the other hand, it is quite unlikely Michael Jordan or the surviving Beatles, or Wayne Gretzky or other colossally accomplished titans would get publicly outraged if someone "dissed" them. It would roll off them, no problem. The reason they wouldn't get torqued is because what they say IS very much "worth the paper it's printed on." They have a calmness that comes from knowing they are right, and knowing they are the best.
(I digress.)
Anyway, semi-apologies for offhandedly cutting-and-pasting a chunk of prose without providing more context and explanation.
The bottom line is that I vigorously hypothesize that Terry's Tips is out to slam IB because IB doesn't steer enough money (or some kind of unstated advantage) to Terry's Tips. That's why Terry included that post in the Terry's Tip's materials; he wanted to discredit IB, and divert attention form the fact that he, Terry, is not recommending the best brokerage deal for his customers.
This is my hypothesis, and I welcome critiques and corrections.
ozzie
PS: I shall endeavor in the future to give more forethought before I put a post up on Elite Trader. My mistake. Apologies for stirring a pot.
I didn't take the time to consider that my cut-and-paste job might stimulate a decent-sized thread, or be seen as stirring a pot.
This was my own fault, due to a lack of circumspection on my part.
I cut-and-pasted that post as an afterthought while I was checking out a communique from Terry's Tips. I was surfing around in a hurry, and jamming through e-mails, and thought I'd throw that cut-and-paste up for the heck of it, and move on to other stuff.
Mistake.
***********************
Nothing wrong at all with IB
***********************
I fully understand and endorse the rationale behind IB's policy regarding treating assignments. IB gives you the tools and the responsibility and the low, low prices. It's up to the trader to handle these things. If the trader gets slaughtered by the chain saw, then the trader has some more learning to do. It's not the chainsaw's fault.
I like that policy. Sink of swim on your own merits. No hand holding. Good stuff. If you need training wheels, pay for them. IB doesn't sell training wheels.
***********************
That post I put up on these boards was originally in a Terry's Tips communique, The tone of the communique was to intended to make IB seem less appealing, for, I believe, the following reason:
I am all-but-certain that the reason Terry of Terry's Tips doesn't recommend IB, even though it is cheaper per contract than Think or Swim or OptionsXpress is because Terry gets remuneration in some form from Think or Swim and OptionsXpress that he wouldn't get from IB. When he is saying he is recommending the VERY BEST brokerages he has found, I don't think he is telling the whole truth. I believe he is recommending what is, in many cases, NOT the very best deal for his clients, in order to butter his bread, is my reading (though, certainly, think or swim and OptionsXpress are among the best around). I am basing this assessment on an e-mail I received from him quite some time ago when I asked why in the world wouldn't he recommend IB, especially for the smaller-time traders, given that IB was cheaper per options contract. His e-mail back said in so many words that IB didn't pay him enough to recommend them. The tone of the e-mail wasn't so bald as that, but that was the gist, was my read.
Possibly that communication is somewhere on my computer. Perhaps I should try to dig it up.
Possibly - POSSIBLY - I am misunderstanding Terry's thinking and motivations. However, certainly, many trading advice providers feather their nests by recommending less-that-optimum brokers, while not telling their customers that, by using the recommended broker, they are, in effect, paying a hidden vig straight to the website operator. This badly undermines any claims these websites operators may make or imply that they are out to make their customers maximum money.
One example:
I don't know about nowadays, but a number of years ago, Underground Trader pushed a brokerage that, as far as I could see, charged many times what other comparably quick brokerages would charge. Jea Yu, the proprietor, might get in a defensive red-meat rage about this assertion, but, c'mon, give me a break. (Or, maybe he would calmly cop to it...? He'd earn my respect if he did.)
An aside:
Notice that when a person or entity gets all in a huff and an outrage and DEMANDS an apology, it is very often because what they are saying is ain't worth the paper it's printed on. Think of how the radical Muslims are flipping out over some dime-store political cartoons. They're flipping out because they feel so very weak, trying to uphold an untenable position. On the other hand, it is quite unlikely Michael Jordan or the surviving Beatles, or Wayne Gretzky or other colossally accomplished titans would get publicly outraged if someone "dissed" them. It would roll off them, no problem. The reason they wouldn't get torqued is because what they say IS very much "worth the paper it's printed on." They have a calmness that comes from knowing they are right, and knowing they are the best.
(I digress.)
Anyway, semi-apologies for offhandedly cutting-and-pasting a chunk of prose without providing more context and explanation.
The bottom line is that I vigorously hypothesize that Terry's Tips is out to slam IB because IB doesn't steer enough money (or some kind of unstated advantage) to Terry's Tips. That's why Terry included that post in the Terry's Tip's materials; he wanted to discredit IB, and divert attention form the fact that he, Terry, is not recommending the best brokerage deal for his customers.
This is my hypothesis, and I welcome critiques and corrections.
ozzie
PS: I shall endeavor in the future to give more forethought before I put a post up on Elite Trader. My mistake. Apologies for stirring a pot.
I thought that the SEC shut down ol' TT. He absolutely destroyed many of his subscribers - to the tune of massive 60-70-80% account losses! Is he at it again?
Who would give him money?
SEC Sues Online Adviser for Conduct Involving âAuto-Tradingâ
FOR IMMEDIATE RELEASE
2005-98
Online Adviser Conducting âAuto-Tradingâ Program Uses Misleading Performance Projections
Washington, D.C., July 1, 2005 â The Securities and Exchange Commission today announced the filing of civil charges against Terryâs Tips, Inc., a Vermont corporation, and Terry F. Allen, of Ferrisburg, Vt., for violations related to their operation of âauto-tradingâ programs. The Commission alleges that Terryâs Tips and Allen used misleading performance projections in marketing the auto-trading programs to clients.
The SEC also issued an Investor Alert, âAll About Auto-Trading,â which lists the steps investors should take to thoroughly check out any auto-trading program before they hand over access to their accounts and hard-earned dollars. The alert explains auto-trading, arms investors with questions to ask, and provides time-tested tips for avoiding costly mistakes.
âThe filing of this case illustrates once again that an investor should exercise care and appropriate skepticism before giving another person authority to direct trading in his account, particularly where that person claims to provide unrealistically high returns to the investor,â noted Ken Israel, District Administrator of the Commissionâs Salt Lake District Office....
Who would give him money?
SEC Sues Online Adviser for Conduct Involving âAuto-Tradingâ
FOR IMMEDIATE RELEASE
2005-98
Online Adviser Conducting âAuto-Tradingâ Program Uses Misleading Performance Projections
Washington, D.C., July 1, 2005 â The Securities and Exchange Commission today announced the filing of civil charges against Terryâs Tips, Inc., a Vermont corporation, and Terry F. Allen, of Ferrisburg, Vt., for violations related to their operation of âauto-tradingâ programs. The Commission alleges that Terryâs Tips and Allen used misleading performance projections in marketing the auto-trading programs to clients.
The SEC also issued an Investor Alert, âAll About Auto-Trading,â which lists the steps investors should take to thoroughly check out any auto-trading program before they hand over access to their accounts and hard-earned dollars. The alert explains auto-trading, arms investors with questions to ask, and provides time-tested tips for avoiding costly mistakes.
âThe filing of this case illustrates once again that an investor should exercise care and appropriate skepticism before giving another person authority to direct trading in his account, particularly where that person claims to provide unrealistically high returns to the investor,â noted Ken Israel, District Administrator of the Commissionâs Salt Lake District Office....
Why can't TWS tell you about such events when they happen and give you 5 minutes to start liquidating the positions you choose ? NO it can't but it does have a zillion things I hardly use !
All these stories are just another sign that IB does not give a damn about individual accounts. Like when they don't answer your emails, return your calls or reply with a two liner. I trade options occasionnaly , mistakes are unavoidable when you trade and when you trade new products or markets. Why should someone suffer losses when it can be avoided? And isn't IB taking advantage of these liquidations?
Those who systematically defend IB without taking into account the circumstances and call the victims of these sometimes arbitrary liquidations inexperienced will sing a different tune the day they make the mistake of not keeping up with the constant TWS changes and minute details of margin rules and IB customer agreement.
As I understand it, assignments occur overnight, and do appear in your account (in TWS's position window) prior to the open, and you do, in fact have a few minutes until they start liquidating.
If you're talking about intraday margin handling, I contend that you either need to leave yourself a reasonable amount of headroom, or watch your positions closely enough to know when you're going to need to pull the trigger. If you don't want to do either of those things, there are plenty of brokers out there with slower risk management systems. Why not just use them?
I've changed brokers a number of times in my short trading career. It never occurred to me to be angry for months at a broker that had policies I didn't like, or didn't trade products I wanted to trade. I either adapted to them or simply found another that worked better for me. Yes, I know it's some work, but it's a hell of a lot better than the stress of being angry at something you can't change and, in the end, more profitable.
If you're talking about intraday margin handling, I contend that you either need to leave yourself a reasonable amount of headroom, or watch your positions closely enough to know when you're going to need to pull the trigger. If you don't want to do either of those things, there are plenty of brokers out there with slower risk management systems. Why not just use them?
I've changed brokers a number of times in my short trading career. It never occurred to me to be angry for months at a broker that had policies I didn't like, or didn't trade products I wanted to trade. I either adapted to them or simply found another that worked better for me. Yes, I know it's some work, but it's a hell of a lot better than the stress of being angry at something you can't change and, in the end, more profitable.