IB Margin...is it always like this?

andiamo · Apr 24, 2007

Okay, so for kicks I thought I would look at selling one (1) naked put on the spyders. I took a look at SPY and picked the 140 strike with a May 18 expiration.

Before I go "all-in" by being short 1 put (yes folks, that is a one), I decided to use the check margin feature that IB provides. Maybe I'm crazy or just totally clueless, but IB just told me that to sell 1 put option on the SPY with less than 30 days to expiration would require:

initial margin= $22k,
maintenance margin = $22k

This can't be right? For 1 contract???
:eek:

FullyArticulate · Apr 24, 2007

IB's formula for computing margin is here:

http://www.interactivebrokers.com/en/trading/marginRequirements/stockIndexOptions.php?ib_entity=llc

You can reduce your margin requirements for short options in three ways:

1) Buy something against it (turn a short put into a very ITM put vertical)
2) Use portfolio margining
3) Sell futures options instead. An ES naked put will only use a few thousand in margin.

atticus · Apr 24, 2007

No, the initial on one short SPY 144 May put is approximately $2600.

andiamo · Apr 24, 2007

Quote from atticus:

No, the initial on one short SPY 144 May put is approximately $2600.

Yeah, $2600 is more in line with what I would have expected.

Not sure what is going on. I will try again tomorrow and maybe IB will tell me something different. I have noticed that since I have upgraded my software a few days ago, some things just aren't working right...I might need to roll back to an older software version.

Anyway, enough of that. Thanks for clearing that up!

demoship · Apr 24, 2007

and, the # it shows you there on the order confirmation screen, is your TOTAL margin requirement AFTER the trade. Which means it counts all your other positions too.

jeffm · Apr 24, 2007

Exactly.

If you just want to see the margin for a single, standalone trade, you can try getting on the IB demo account. If there are no other trades in place, you can do a "check margin" on your sample trade to get a clean look.

and, the # it shows you there on the order confirmation screen, is your TOTAL margin requirement AFTER the trade. Which means it counts all your other positions too.

MajorUrsa · Apr 24, 2007

Quote from jeffm:

Exactly.

If you just want to see the margin for a single, standalone trade, you can try getting on the IB demo account. If there are no other trades in place, you can do a "check margin" on your sample trade to get a clean look.

Demo account is not reliable for checking margins, maybe you mean the paper-trade account.

What I do to find margin-req for a single sell is first enter a sell-order for 1, check the m-req, change the orderamount to 2, and heck again. The diff is the needed margin for a single sell.

Ursa..

deviltrader · Apr 25, 2007

Quote from MajorUrsa:

Demo account is not reliable for checking margins, maybe you mean the paper-trade account.

the demo account is reliable for checking margin. I have compared it to my live account. They use the same backend so I don't see why it would show a different result than your regular account.