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IB Margin Changes
- Thread starter gtcharlie
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Quote from FSU:
Hi Def,
If IB is forced to liquidate a position, does the system pull out spreads or simply liquidate each position individually. For example say a customer has several option butterflies in a stock. Will the system know that they are butterflies and send an order to liquidate as a spread or simply offer each option individually?
By the way Def I am not posting as Jayre.
But while you are here can you get an answer for us to FSU's question?
Quote from Options12:
By the way Def I am not posting as Jayre.
But while you are here can you get an answer for us to FSU's question?
Def,
Just so you know, I wasn't sure whether to participate in this thread as it seems to be very confrontational, which is not my intent. I have seen both Timber Hills trader's and IB's broker's in action in the pits and have never seen anything that appears unethical. I understand that Timber may be on the other side of a liquidation at times as they are streaming quotes and may be the best quote. This does not bother me.
But the auto liquidation possibility does scare me a bit, so I am just trying to understand how your program works, i.e. does it have the ability to pull out spreads from a position for better fills. I was also wondering if there is any manual review that takes place before an auto liquidation. There have been times in the past where things have gone crazy in the SPX and there are $10 wide quotes in one option, while a single order may make another quote $2 wide. I had a butterfly on once in this situation that marked at a $3 credit, showing a large loss (the butterfly cant be worth less then 0). Would this type of situation potentially cause an auto liquidation?
Again I am not stating IB has no right to liquidate, I am just trying to understand the process.
Jayre:Quote from jayre:Jack, do me a favor, call infinity tomorrow, ask them what is the "standart process" how they handle margin deficits? Period.
I called and spoke to my account rep at Infinity. I don't know who you spoke with, but he confirmed their auto-liquidate process. Call him at (800)634-7907. His name is Andy. If you are really into conspiracy theory and think the number is my 800 number, call the number on Infinity's website and ask to speak to Andy Delap.
Jack
Sice Def is not answering questions (he let's jackr answer for him) so let me answer question with some undisputed facts.Quote from FSU:
Def,
But the auto liquidation possibility does scare me a bit, so I am just trying to understand how your program works, i.e. does it have the ability to pull out spreads from a position for better fills. I was also wondering if there is any manual review that takes place before an auto liquidation. There have been times in the past where things have gone crazy in the SPX and there are $10 wide quotes in one option, while a single order may make another quote $2 wide. I had a butterfly on once in this situation that marked at a $3 credit, showing a large loss (the butterfly cant be worth less then 0). Would this type of situation potentially cause an auto liquidation?
Again I am not stating IB has no right to liquidate, I am just trying to understand the process.
1. The fact is, that there is no manual review before an auto liquidation, so if there is a flash crash, $10 bid/ask spread, you are not protected. I think we can all agree on that.
2. The fact is, that whie a butterfly cant be worth less then 0, that would not help you. I once had a "debit call spread" where I owned the 65 call & short the 75 call liquidated for a loss because it was calculated negative.(there where no other poistions in the account).
3. The fact is that IB is a great brokerage, offering a almost any product for unbelieveble low commisions. IB would be my first choice if you are not using margin or complex option strategies.
4. The fact is that IB is the only (or one of the only) firm that liquidatation are done in "1 minute after your acount going into margin defecit", IB clients also sufferd increased margin requirmens (with few days notice) in 2008 and for small cap stocks in Sep 2011, creating a very dificult sitiuation for IB margin clients, no other firm that I'm aware of has done it in the same manner.
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Quote from jayre:
Sice Def is not answering questions (he let's jackr answer for him) so let me answer question with some undisputed facts.
1. The fact is, that there is no manual review before an auto liquidation, so if there is a flash crash, $10 bid/ask spread, you are not protected. I think we can all agree on that.
2. The fact is, that whie a butterfly cant be worth less then 0, that would not help you. I once had a "debit call spread" where I owned the 65 call & short the 75 call liquidated for a loss because it was calculated negative.(there where no other poistions in the account).
3. The fact is that IB is a great brokerage, offering a almost any product for unbelieveble low commisions. IB would be my first choice if you are not using margin or complex option strategies.
4. The fact is that IB is the only (or one of the only) firm that liquidatation are done in "1 minute after your acount going into margin defecit", IB clients also sufferd increased margin requirmens (with few days notice) in 2008 and for small cap stocks in Sep 2011, creating a very dificult sitiuation for IB margin clients, no other firm that I'm aware of has done it in the same manner.
Continue in next post
Again, I don't use IB, but I don't like it when people don't take responsibilty for their actions.
1. IB can't be held responsible for widening of the market quotes. That's the risk you take when you enter the market. Similarly if there is a flash crash, it's not IB's job to determine whether or not it will revert back.
2. In theory you are right. But in reality a butterfly can be bought or sold for zero. And the sum of the legs doesn't have to equal the price of the butterfly. Again, it's not IB's job to determine how to best reduce YOUR account because YOU lost money.
3. Perhaps you don't understand margin accounts.
4. This is a business decision by IB. It's well within their right. Because they are strict with their margin guidelines smart people don't have to subsidize your losses that IB eats if your account goes negative equity. Does Timberhill profit if you are margin called, probably. But they would rather have a free commission paying customer that Timberhill can continue to profit from rather than some bozo that they keep having to liquidate.
And no firm margin calls a client cleanly. They're only concern is to reduce their short put exposure on you as quickly as possible.
Stop whinning about doing a trade you didn't understand and getting burned by it.
To DEF or IDS or any other employees of Interactive Brokers who scan these boards in an attempt to clarify, defend, or just simply comment on their company's policies, would you please Answer FSU's well articulated couple of questions concerning (and I'm just trying to summarize here)
(1) IB's auto liquidation software capability as it relates to making intelligent margin reducing trades within the context of spreads, strangles or other inter-dependent positions.
(2) whether or not there is any human review to make sure that a margin deficiency is not related to a mis-mark or system error before the auto liquidation trades trigger is pulled
And then would you answer the remaining questions posed under this thread and speculated on by many including
(3) When TH takes the opposite side of a liquidated trade and profits accordingly, are these profits tracked and available via disclosure to the liquidated customer?
It's actually cool that you employees are available on this board to clear this stuff up. And I will also agree that the IB platform is a good way to trade multiple instruments under one account. Infinity Futures and most others cannot compete with you there. Not to mention you offer insanely low minimums for products like portfolio margin.
(1) IB's auto liquidation software capability as it relates to making intelligent margin reducing trades within the context of spreads, strangles or other inter-dependent positions.
(2) whether or not there is any human review to make sure that a margin deficiency is not related to a mis-mark or system error before the auto liquidation trades trigger is pulled
And then would you answer the remaining questions posed under this thread and speculated on by many including
(3) When TH takes the opposite side of a liquidated trade and profits accordingly, are these profits tracked and available via disclosure to the liquidated customer?
It's actually cool that you employees are available on this board to clear this stuff up. And I will also agree that the IB platform is a good way to trade multiple instruments under one account. Infinity Futures and most others cannot compete with you there. Not to mention you offer insanely low minimums for products like portfolio margin.
Quote from newwurldmn:
Again, I don't use IB, but I don't like it when people don't take responsibilty for their actions.
1. IB can't be held responsible for widening of the market quotes. That's the risk you take when you enter the market. Similarly if there is a flash crash, it's not IB's job to determine whether or not it will revert back.
2. In theory you are right. But in reality a butterfly can be bought or sold for zero. And the sum of the legs doesn't have to equal the price of the butterfly. Again, it's not IB's job to determine how to best reduce YOUR account because YOU lost money.
3. Perhaps you don't understand margin accounts.
4. This is a business decision by IB. It's well within their right. Because they are strict with their margin guidelines smart people don't have to subsidize your losses that IB eats if your account goes negative equity. Does Timberhill profit if you are margin called, probably. But they would rather have a free commission paying customer that Timberhill can continue to profit from rather than some bozo that they keep having to liquidate.
And no firm margin calls a client cleanly. They're only concern is to reduce their short put exposure on you as quickly as possible.
Stop whinning about doing a trade you didn't understand and getting burned by it.
I am glad you are agreeing mostly with the facts that stated (Iâm still in middle of completing the rest of the facts). Now my concern is NOT that I was liquidated on a couple of spreads, the loss there was a negligible amount, my concern is that IB has a problem answring questuions straight forward, acknowledging the truth, and that a âconflict of interestâ re margin/liquidation actually exists due to the fact they have a partner company a market maker with a preference on market orders.
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