IB Margin requirements rising as VIX falls, reaching nonsense levels
- Thread starter cruisecontrol
- Start date
I think you misunderstood my post to mean that I am trading VIX products (I am not). Otherwise what you said makes no sense to me. I am talking about VIX as a proxy for overall volatility. If margins are linked to volatility, then they should be falling together with VIX. The fact that the opposite is happening for several weeks means IB's system uses a very lagging indicator of volatility, or it's a completely arbitrary decision on their part. Either way I am not impressed with this kind of risk management.
For futures, i dont think intraday should go above exchange overnight.
Overnight margin is the amount the exchanges require for holding over the weekend, when markets are completely shut and could gap massively after the weekend.
IB demanded 3x CME overnight margin for intraday trades
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The fact that future expected volatility is so volatile would be a good reason to keep margins high.
I thought the whole point to trade with IB was that you put up with their shitty customer service in exhange for a robust risk management system that prevents them from going under (and taking your hard earned dollars with it).
What numbers? That they have plenty of customers? How is it related? That's like someone talking about gearbox problems on a Ford and you replying with "but look how many cars they sell".
VIX peaked three weeks ago at ~85 and has since dropped by 50%.
Yet IB is continuously increasing their margin requirements as VIX is dropping. Every day is higher than the last. As I check it this morning, Portfolio Margin is barely better than reg T. I'm scared that it can just keep going higher and higher, because why not? Their system appears to have no sense to it. I might actually end up downgrading to a reg T account at some point if that gives more margin
I always believed IB's risk aversion was a good thing that protected customers like me, and people who complained about margin were just whiners who were taking too much risk anyways (naked option selling, etc). Seeing how their system behaves now, I no longer believe this.
This is, by far, the most profitable trading environment I've ever seen in my career. It might be once in a lifetime. And IB is hamstringing us with this goofy margin system. I am making a week worth of profits every day, but I could be making more than 2x that with a proper 15% PM account. (This is straight up equity trading by the way, cash neutral portfolios, no options.)
I hope IB gets their act together, but I am actively looking into switching brokers at this point.
What products are you trading?
Yup. But is correlation risk for IB. They have 100mm in equity and 5bn in customer deposits (for example). If everyone borrows the max under regt then IB has to borrow 5bn from some counterparty. If 2percent of the customers blow up, then IB is finished.
Further, If the repo lines/LOC get pulled then IB may not be able to fund all the customers who want margin. So they should make it more painful to borrow funds.
This is the systemic risk in the system right now.
Of course, you can build your own risk management system and go to a broker who values customer service more: The kind of broker who gives you a nice friendly phone call asking you to clean up your margin call by 3pm. That’s what I chose to do.
Approx 5-10% of futures trading volume is retail per the last CME stat's I looked at. Retail futures day traders are the minnows, not the whales.
IBs futues margins are to high - twice that of any other top tier retail brokers.
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