IB Initial Margin VIX Futures

[FCXoptions]

Does anybody know what is up with the margin on VIX future spreads through IB? It seems jacked up. To enter Jul/Aug it says $3,042 initial margin and only $730 for maintenance. Seems odd that the initial is over 4 times the maintenance. Both are of course significantly higher than the CFE, Their site says $429 and $390 respectively. I know IB raises the margin on stuff regularly, but just thought it was crazy they had raised it that much on the initial.

The front spread is roughly $1,200 and $1,000

 

[ids]

IB does not like to hold low liquid futures on your behalf. It is a way to tell you that. The initial margin for VIX is increasing steeply starting from June expiration. This additional initial margin charge was put in effect many years ago.

 

[moonmist]

Does anybody know what is up with the margin on VIX future spreads through IB? It seems jacked up. To enter Jul/Aug it says $3,042 initial margin and only $730 for maintenance. Seems odd that the initial is over 4 times the maintenance. Both are of course significantly higher than the CFE, Their site says $429 and $390 respectively. I know IB raises the margin on stuff regularly, but just thought it was crazy they had raised it that much on the initial.

The front spread is roughly $1,200 and $1,000

Hi,

Before October 2007, Interactive Brokers had very low margin requirement for futures, options on futures, spreads between futures, spreads between options on futures, inter-commodity spreads, intra-commodity spreads, etc.

After that, they set up their own rules to calculate the margin requirement. Hence, their margin can be much higher than the minimum set by the exchange:

http://www.elitetrader.com/et/index.php?threads/shorting-es-future-regulation.287299/#post-4042334

You may like to consult Interactive Brokers for the rules to calculate the margin of that particular spread.

Just my two cents.

 

[sellindexvol66]

IB does not like to hold low liquid futures on your behalf. It is a way to tell you that. The initial margin for VIX is increasing steeply starting from June expiration. This additional initial margin charge was put in effect many years ago.

Having mostly switched after 15 years with IB due to this issue, I also want to point out the far back switches where being accessed another liquidity penalty. Having said that, I have traded thousands of vix futures going back 7 years and never ever had a liquidity issue with back vix futures. Let's not forget those spreads with added margins are the ones that are far less sensitive to spot vol than the nearer ones.

 

[FCXoptions]

Yeah that is what I didn't understand. I assumed them being less sensitive would cause the opposite effect on margin as they are all relatively liquid. I'm assuming their method on calculating that is here to stay if they didn't accomodate you.

 

[sellindexvol66]

Yeah that is what I didn't understand. I assumed them being less sensitive would cause the opposite effect on margin as they are all relatively liquid. I'm assuming their method on calculating that is here to stay if they didn't accomodate you.

well, i know of a bigger guy in vixland than me who got no where also..so i just followed. the bigger issue than margin was the auto liq feature..that matters if u are nowhere near full margin (i ran a very conservative book even with multiples of exchange margin levied). if u had a crazy/wrong overnight print or in a flash crash ....their algo can take u out...then good luck trying to explain that the prices quoted were not "real".

in IB defense though, your cash in theory is far safer and the spread trader front end kicks ass to the stuff i have to live with now...still not enough to keep me there.

 

[moonmist]

well, i know of a bigger guy in vixland than me who got no where also..so i just followed. the bigger issue than margin was the auto liq feature..that matters if u are nowhere near full margin (i ran a very conservative book even with multiples of exchange margin levied). if u had a crazy/wrong overnight print or in a flash crash ....their algo can take u out...then good luck trying to explain that the prices quoted were not "real".

in IB defense though, your cash in theory is far safer and the spread trader front end kicks ass to the stuff i have to live with now...still not enough to keep me there.

Extremely high margin requirement plus auto-liquidation can be a deadly combination. In IB defense, I think their SPAN margin requirement before October 2007 was insanely low in most cases. Then, they swung from some one extreme to the other.

Well, look on the bright side:
If some gurus tell you that Interactive Brokers has low margin requirement for derivatives and their spreads, spam alert.

 

[moonmist]

Joking aside, the lesson I learned is that:

Never put all your eggs in one basket.

If I need to develop an automated trading system, I'll use Ninja Trader, Sierra Chart, etc. Hopefully, I can then switch broker with minimal effort.

Just my two cents.

Merry Christmas to all.

 

[nomoremondays]

Having mostly switched after 15 years with IB due to this issue.

Hi,
What did you switch to from IB? Presumably you're enjoying better margins there right?

 

[rallymode]

Hi,
What did you switch to from IB? Presumably you're enjoying better margins there right?

RJO and advantage will give you exchange margins on every single spread in the universe. Better commissions too if you trade size. IB requires almost double in initial on many spreads out there and it's ridiculous to say it's to protect you from yourself because of lack of liquidity.