IB Margin Problem

Quote from chucksil:

zdreg, please read my posts again - I have said several times I DID NOT try to close out a spread by selling the long calls first!!!!! Why do you keep saying that??? IB would not let me close out my spread because they had miscalculated my margin by assuming I had 20 short NOV calls uncovered, even though they WERE covered. End of story. No need for me to go through all my trade records and give you a full accounting of it - I have already written what the problem was, very clearly.
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Hi chucksil:

I think we're all grappling for a potential reason as to why this happened. What I'm wondering is how exactly you entered the original trades and in what order. This may have been what set up the faulty position. You said in an earlier post that you legged into some of these positions. I can see where it might have been possible to mis-pair some of the trades depending on how how you originally entered the positions. Just a thought.

BTW, I would expect the computer to "seek out" the most advantageous pairing in terms of margin. If it did not do this, then IB needs to address this. Because obviously, a sizable option account with a number of positions might well get into trouble if the computer has no real rhyme or reason to it's margin calculations. Again though, if you origiinally entered into these positions by legging, it might be possible that an erroneous pairing was created then, before you had legged into the offsetting position.

OldTrader
 
OldTrader - I too am still grappling for a reason. I also thought their margin analyzer would always seek out the best result. But they told me sometimes it does something screwy.

As for the order of my trades, I would initiate a credit call spread each day on SPY. Either through a spread order, or if I legged in, the trades were only a few minutes apart. On Friday Oct 7 I only had OCT spreads in my account, equal number of short and long. That day I initiated my first NOV spread. I didn't notice a problem until earlier this week when TWS was telling me I was near my margin capacity, when I thought I was only at about half of it. That is what prompted my call to IB, and he walked me through it, position by position, telling me which short option was paired off with which long option.

Somehow my tidy little universe of OCT vertical spreads, and NOV vertical spreads, which were all initiated on separate days, got intertwined.

Definitely a flaw in the software when it treats 20 NOV short calls as naked, because it took the 20 NOV long calls that were supposed to be covering them, and instead it assigns them to cover 20 OCT short calls, leaving 20 long OCT calls not covering anything!
 
" Either through a spread order, or if I legged in, the trades were only a few minutes apart.



this is exactly why your scenario is not be believable. nobody gives a damn if your trades were a few minutes apart. if you legged in or legged out and created a short position you may be subject to a margin call.

"it is definitely a flaw in the software."

it cannot be said with certainty but if there were a flaw it is highly likely that it would have been previously mentioned on ET or someone would have responded to this thread with a similar problem .
 
I will tell you again - I was never short!!! When opening a credit spread, I went long first. When closing a credit spread, I bought back the short option first.

How many times do I need to tell you this?

IB told me my margin got screwed up because the system paired up OCT shorts with NOV longs, even though I only did verticals, not calendars.
 
Quote from zdreg:

" Either through a spread order, or if I legged in, the trades were only a few minutes apart.


this is exactly why your scenario is not be believable. nobody gives a damn if your trades were a few minutes apart. if you legged in or legged out and created a short position you may be subject to a margin call.
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Even if you created a long postion but the short position was covered you could be subject to a margin call.

Just thinking out loud:

You are long a callspread to the max. The stock rallies to your upper strike. You buy back the short strike and don't have the cash to pay for the increased value (even though your account is positive). You hit a margin call.

The problem with these threads is the OP doesn't ever disclose completely what is going on. So everyone is guessing.
 
Quote from chucksil:

I will tell you again - I was never short!!! When opening a credit spread, I went long first. When closing a credit spread, I bought back the short option first.

How many times do I need to tell you this?

IB told me my margin got screwed up because the system paired up OCT shorts with NOV longs, even though I only did verticals, not calendars.
More...

New lesson: understand what your margin capacity is if you are trading on leverage and what it could be and call them if it's not what you think it should be.
 
Quote from chucksil:

I will tell you again - I was never short!!! When opening a credit spread, I went long first. When closing a credit spread, I bought back the short option first.

How many times do I need to tell you this?

IB told me my margin got screwed up because the system paired up OCT shorts with NOV longs, even though I only did verticals, not calendars.
More...

the person you spoke to could have given the wrong answer.
 
I experienced similar problems when legging into vertical spreads on VIX options. For whatever reasons, switching to VXX options eliminated my problem. I was thinking perhaps it was a futures vs. ETF issue, but you seem to be having the issue with ETF options if you're using SPY options.

I recently lost a chunk of money when I legged into a large vertical spread on VIX options just before the close. I should have had very little margin usage as I was able to offset my opening long position with a short of the next strike for almost the same price. Unfortunately, IB's calculation put me over my margin limit by a few cents causing an auto-liquidation into an after-hours market moving significantly and with large spreads. What should have been a nice, essentially locked-in profit, resulted in a significant loss.

AM.
 
Thank you for sharing your example, which sounds very similar to mine. There is an issue with how IB calculates margin on verticals. It should be simple - difference in the strike prices.
 
Quote from Attacking Mid:

I experienced similar problems when legging into vertical spreads on VIX options. For whatever reasons, switching to VXX options eliminated my problem. I was thinking perhaps it was a futures vs. ETF issue, but you seem to be having the issue with ETF options if you're using SPY options.

I recently lost a chunk of money when I legged into a large vertical spread on VIX options just before the close. I should have had very little margin usage as I was able to offset my opening long position with a short of the next strike for almost the same price. Unfortunately, IB's calculation put me over my margin limit by a few cents causing an auto-liquidation into an after-hours market moving significantly and with large spreads. What should have been a nice, essentially locked-in profit, resulted in a significant loss.

AM.
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is it not company policy to liquidate only during regular trading hours?
 
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