They can have a house margin rule instead of charging some sort of wacky haircut. Raise the margins. Don't allow positions you don't want! Plenty of prop firms used to have a "no naked seller" rule.
IB is going to start charging a daily exposure fee
- Thread starter fbell50
- Start date
They already do raise the margins on a ton of products, or on all the futures and future spreads I seem to look at they are higher than exchange requirements.
You don’t quite understand what’s happening, and unfortunately none of the posts here have yet to actually explain in more detail what’s going on, let me try to share what I know about this all. I don’t know about your other positions (and this will be very key) but I know about your ES lot and your current excess liquidity as a percentage.
I’ve created a hypothetical portfolio of (just) 15 long ES futures in an account, it takes up approximately $72,000 in maintenance margin. So if you just held this position, at 58% excess liquidity you’re net liquidation value (NLV) stands to be around $170,000.
Based on how equity has been (has been might no longer be valid) with the exposure fee, it takes the -30% and +20% and determines what your NLV would be should this occur.
Now, in the scenario of -30% the 15 ES futures would create a loss of approximately $430,192 which applied to your account, presently at approximately $170,000 would create a real dollar shortfall (or what IB calls exposure) of $260,192.
When the exposure fee first was introduced, you were allowed approximately $125,000 USD of exposure before the fee was charged – perhaps this has been lowered, or removed altogether, hence some other users seeing it for the first time.
But like I mentioned above, your other positions will change how my calculation works, but just based on this and how your excess liquidity stands, I can see how you might have fallen into this scenario.
Two other things, I don’t agree with what IB is doing here, but I won’t leave for reasons mentioned. Secondly, I’m one of those (so called apparently) crazy short option holders and I love it – and I understand risk very well.
Good input. I can almost guarantee you will be treated better elsewhere. Especially if you have a decent size account. But to each his own.
One last thing. Can we agree that whatever margin rule you are operating under is not firm in the slightest and subject to drastic changes which will definitely not be in your favor?
I figured they did that. My point is that if they don't want naked sellers, don't allow them. This weird grey area doesn't serve anybody and the new margin rule is overbroad. Can't treat naked option sellers the same as long futures holders. The risk of "catastrophic losses" are just too different. Anyway...I just hate IB and any other bastard that beats his wife. That's all.
Yes, I fully support modifications to exchange margins even when not in my favor. Just about everything I trade falls under SPAN, which is advantageous to both the trader, broker and exchange. Most importantly, and I think this hits on it big time, it’s transparent.
I can calculate it quickly, and most exchanges send out notices to everyone (traders, brokers, risk managers, etc.) the day before changes are implemented so you’re not (more or less) in the dark.
This exposure fee has been documented only slightly better than when it was first introduced, which isn’t saying much, and apparently to this day some traders are still completely lost on its meaning and how it’s applied.
If this type of thing happened in just about any other industry it would be a PR nightmare.
Most keep using IB because they have no better alternative with their small account sizes to find a firm that gives them futures access to multiple exchanges.
IB is a horrible choice for futures and short options traders, due to the egregious exposure fees.
But for equities and long options traders, IB is decent because the exposure fees are negligible.
IB is a horrible choice for futures and short options traders, due to the egregious exposure fees.
But for equities and long options traders, IB is decent because the exposure fees are negligible.
Your idea pushes away short term intraday day holders. Think of it like fx space. You pay the roll at the cutoff time once a day. If you don't hold then you don't pay. The intent is to disperse those who run sky high risk at the expense of others' fund holdings. I welcome how IB runs it's ship.
Last edited: