I am now with a Hong Kong based broker, which has a history over 40 years. But I am not sure whether they accept any single prop trader. But you can try to contact them if you want.
IB is going to start charging a daily exposure fee
- Thread starter fbell50
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I am now with a Hong Kong based broker, which has a history over 40 years. But I am not sure whether they accept any single prop trader. But you can try to contact them if you want.
it is only because newedge people are arrogant pricks who generously open accounts when they see a dummy standing in front of them. On the other hand, when they get the impression they face someone who minds minimizing brokerage commission they start to play hardball. They still think brokers can charge whatever they like and I got the impression they follow the "Greek" economic business model: When demand drops -> increase the price to make up for lost revenue. I had only bad experience with newedge. If you know someone at UBS prime then they can help already with 5m accounts. But stay as far away from Newedge as you can imho.
I didn't get the impression Newedge look for amateur customers as it's difficult just to get to talk to someone there and it's been advised a couple of times on this forum as a step up from IB but thanks for the info on UBS
how do you define amateur customers. I believe they did not see much potential for commission green when you talked to them and they told you BS. Bloomberg makes contracts and sells licenses to single customers (one-man shows), so does GS, UBS, and most other banks and brokers as long as you meet their account requirements. I heard the same story you shared re Newedge multiple times and have seen and met with a number Newedge guys over the years or bumped into them at bars and most are total wankers who inflate their value and services.
I've done some what if testing with the risk navigator. I have a large short position in UVXY which is a 3x etf of the vix. While the vix is a measure of volatility, there is a strong negative correlation to the market as a whole. The market goes up, vix/UVXY goes down and vice-versa. I am also about 90% long. My short UVXY is about 16%. So I am effectively about 106% long. My true short position is negligible.
Performing a what if analysis in IB's risk navigator I removed my long positions one by one and as I did my exposure fee steadily grew to almost 5x its original value.
Their algorithm is treating UVXY as if it is positively correlated with the market. This is clearly a major flaw. I would also argue that charging an exposure fee with nothing but a 16% short UVXY position is a flaw.
Performing a what if analysis in IB's risk navigator I removed my long positions one by one and as I did my exposure fee steadily grew to almost 5x its original value.
Their algorithm is treating UVXY as if it is positively correlated with the market. This is clearly a major flaw. I would also argue that charging an exposure fee with nothing but a 16% short UVXY position is a flaw.
Suppose VXX doubles overnight, then your 16% short UVXY position becomes a 96% short position. Unlikely, but definitely in the realm of possibility. Maybe IB has extreme cases built into volatility products?
A "solution" might be to hold your UVXY position at another brokerage.
Actually I was wrong, UVXY is a 2x etf. But that's not relevant to an overnight double of VXX which would merely double UVXY. A 16% short position would then be 32%.
If VXX doubles overnight, wouldn't UVXY theoretically quadruple overnight (i.e., 16% x 4= 64% exposure)? Is my math wrong?
You are absolutely right. I had a brain fart. I've had a chance to look at the vix futures. The highest daily plus change was 29% on 2/28/2007, which would be a 58% change in UVXY. My data goes back to 4/7/2004, so it includes the financial crisis.
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First-time poster here. I just got this same notification from IB that they'll be charging me the exposure fee starting Oct 6. I sell naked DOTM futures options in relatively small position sizes (relative to my account size). Based on my current positions (which are rather light because I've de-risked due to the recent volatility), the amount they'd be charging me annualized turns out to roughly 0.7% of my total account balance. IMO that's not entirely unreasonable based on the tail risk of selling naked futures options.
It looks like the order-entry interface now provides an estimate of how entering a trade will affect this exposure fee. Strangely, while IB says they're only charging the fee for equities and oil positions, the order estimate is calculating a very small addition to the exposure fee for other positions (e.g., corn, natural gas). I guess their algorithm assumes some correlation between other markets and the ones they charge the exposure fee for (equities, oil).
It looks like the order-entry interface now provides an estimate of how entering a trade will affect this exposure fee. Strangely, while IB says they're only charging the fee for equities and oil positions, the order estimate is calculating a very small addition to the exposure fee for other positions (e.g., corn, natural gas). I guess their algorithm assumes some correlation between other markets and the ones they charge the exposure fee for (equities, oil).