IB Margin requirements

Quote from FutureScalper:



I execute trades, often in seconds; and have total control; unless, of course, there's some catastrophic failure which is pretty unlikely.
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Well outages happen, globex and ecbot do go down sometimes during the day.

A 500 pt move while either is down would cause some IB accounts using the old intra day margin to go negative.

IB would then have to cover losses itself until the clients pays up.
 
Quote from FutureScalper:

As of right now, IB has apparently updated the listed tabular intraday margins. Of course it is unknown whether their web updates are the same as the margins they are actually applying.

IT'S WORSE THAN THEIR FORMULA SUGGESTED

Their formula is:

"We feel the current market volatility warrants additional margin to ensure accounts have adequate financial capacity to handle sharp, adverse movements. Accordingly, effective August 6 2007 and until further notice, IB will apply the following logic to determine the intraday margin:

Effective Intraday Margin is equal to the table value (listed below) or 4% of the contract value (price times contract multiplier). If this amount exceeds the normal overnight margin as listed on the below table, it will be capped at the overnight amount. Mathematically, this can be expressed as:
IntradayMargin = MIN( overnightMargin, MAX(tableMargin,4%*contractValue) ) "

Unless I can't calculate... :(

ES should be around $2948, by their formula, but the table pegs intraday = overnight = $3500.

YM should be around $2672, but they peg it up to $2813.

Agricultural futures ECBOT like corn, wheat also intraday=overnight generally.

metals, etc. generally the same thing.

Now we all live in a "safer", if less leveraged, trading world :( FS
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thats been my experience as well. iv'e been having a hard time making their math add up. i know i'm dense sometimes but i didn't think i was that bad.
 
Whenever you say daytraders are at risk of market fluctuations, you must keep in mind that Swing traders are as well, and perhaps much more because they aren't there to react to the price fluctuations, if any. Their margins should be doubled. Fair is fair, and IB is being selective in its "fairness". FS.
 
Quote from FutureScalper:

Whenever you say daytraders are at risk of market fluctuations, you must keep in mind that Swing traders are as well, and perhaps much more because they aren't there to react to the price fluctuations, if any. Their margins should be doubled. Fair is fair, and IB is being selective in its "fairness". FS.
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Which should be doubled - the overnight margins? Which would in effect be twice the exchange minimum?

I think also too that swing traders have harder stops since like you say they aren't there to monitor the market. A swing trader when they enter their trade have already entered their exit too.
 
Yes, overnight margins should be doubled, if intraday margins should be doubled.

Daytraders, or at least I, always have targets and usually stops in place the moment there is a fill. I'm always on top of each tick, so it's pretty unlikely a market is going to do something I couldn't react to. (9/11 Nightmare scenarios aside...)

I hope we can all agree that IB's response to the volatility crisis is not even-handed. 'Nuff said. FS
 
Quote from FutureScalper:

Yes, overnight margins should be doubled, if intraday margins should be doubled.

Daytraders, or at least I, always have targets and usually stops in place the moment there is a fill. I'm always on top of each tick, so it's pretty unlikely a market is going to do something I couldn't react to. (9/11 Nightmare scenarios aside...)

I hope we can all agree that IB's response to the volatility crisis is not even-handed. 'Nuff said. FS
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Maybe you are the exception to the rule when it comes to day trading, but I am sure that IB based their decision to raise margins based on a few decades of experience. They can't double the overnight w/o a mass exodus to one of the more lenient brokers who will give away anything to get more assets under management. And if you really want the margins raised just to screw the rest of us as seems be your argument than you can always petition the CME Group. IB's margins are a reflection of theirs.

If you truly want cheap intraday, look at one of the more professional trader's guys like Velocity, vCap etc. Unless they changed margin rules, you can still get away with trading for 500/contract.

If you really want the cheapest way to trade, get a membership and lower your costs even more. It is much easier today than it was 5 yrs ago.
 
You're precisely right:

"...they can't double the overnight..."

[without massive political / business repercussions]

Intraday active traders, daytraders, scalpers use higher leverage and compensate for the increased "risk" by increased "control". I think that's a fair trade-off.

I've put all this behind me. It's not a concern for my own accounts, rather for the small traders who came to IB with limited resources and who are starting out in the business.

Yes, I know... if they don't have enough cash they shouldn't be in the game, right? Probably true. A chicken-egg problem I guess. :)

FS
 
Quote from FutureScalper:

You're precisely right:

"...they can't double the overnight..."

[without massive political / business repercussions]

Intraday active traders, daytraders, scalpers use higher leverage and compensate for the increased "risk" by increased "control". I think that's a fair trade-off.

I've put all this behind me. It's not a concern for my own accounts, rather for the small traders who came to IB with limited resources and who are starting out in the business.

Yes, I know... if they don't have enough cash they shouldn't be in the game, right? Probably true. A chicken-egg problem I guess. :)

FS
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If you take a look at some of the relatively recent price action, what you see is some examples of 40-50 handle moves in the ES in less than an hour. Other examples of $400-$500 moves in 5 minutes.

Clearly these types of moves simply reflect an increase in volatility. One reasonable response to this might have been for the trader to reduce the size of his typical position.

But one way or another, trading with $500 margin in a climate where a $500 move could occur in 5 minutes is ridiculous. The other question is how quick the firms liquidation software kicks in, because alot can happen very, very quickly.

I'm not even remotely close to using even the exchange minimum overnight margin. I learned a long time ago not to overleverage myself. So these moves by IB really don't impact me.

But at the same time, I think IB should acknowledge that while safety of the overall firm is a priority obviously, that they should not be their brothers keeper. In other words, there's a fine line between ample margin, and overkill. Personally I think a $3800 requirement for a day trade in ES is too much. If a trader wants to leverage himself in a way that may well heighten risk too much, in the end that is still the traders decision provided these decisions don't threaten to bring the firm down.

OldTrader
 
Here's what I don't get...

IB was concerned about these intraday traders "bringing the firm down".

First of all, I thought those were a minority of smaller traders.

And I thought they were responsible for their margin calls, not IB, but obviously there's something that's happened which slammed IB in the pocketbook (I am speculating).

And IB's automatic liquidation should be fast enough during active intraday periods and, if it isn't, then that also applies to Swing positions where overnight market liquidity is usually very poor so I would think liquidating would be much more of a challenge than during the day sessions.

And the majority of larger traders, who Swing or invest, appear to me to represent a significant risk during highly volatile periods, but we've already covered that.

$3500 for ES ?? Yes, something's got to give and the more aggressive firms will get a portion of IB's business if they don't give some timeframes or indication when this intraday madness will stop.

I can get 3 or 4 times the buying power at another firm, and I will use that to scale in and out very carefully in markets like ES where a "big volatility intraday move" might be 20 ticks.

I can spend an hour waiting for ES to move 3 ticks and, anyway, that's why I don't daytrade it, but that's another topic.

:) a sense of humor helps. FS
 
Quote from FutureScalper:

Here's what I don't get...

IB was concerned about these intraday traders "bringing the firm down".

First of all, I thought those were a minority of smaller traders.

And I thought they were responsible for their margin calls, not IB, but obviously there's something that's happened which slammed IB in the pocketbook (I am speculating).

And IB's automatic liquidation should be fast enough during active intraday periods and, if it isn't, then that also applies to Swing positions where overnight market liquidity is usually very poor so I would think liquidating would be much more of a challenge than during the day sessions.

And the majority of larger traders, who Swing or invest, appear to me to represent a significant risk during highly volatile periods, but we've already covered that.

$3500 for ES ?? Yes, something's got to give and the more aggressive firms will get a portion of IB's business if they don't give some timeframes or indication when this intraday madness will stop.

I can get 3 or 4 times the buying power at another firm, and I will use that to scale in and out very carefully in markets like ES where a "big volatility intraday move" might be 20 ticks.

I can spend an hour waiting for ES to move 3 ticks and, anyway, that's why I don't daytrade it, but that's another topic.

:) a sense of humor helps. FS
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There was something that slammed IBs pocketbook, unknown whether or not directly related to raising intraday margins. Read the 10Q... there was a 30M+ loss (which was off-loaded to a non-public, but affiliated entity). Of more importance, it seems there is parsimonious effort being made across all IB divisions to increase equity capital and reduce margin-related borrowings. fwiw; fully secured margin balances helped IB increase interest income 59%.

Heres the link to the 10Q...
http://www.nasdaq.com/asp/quotes_sec.asp?symbol=IBKR&selected=IBKR&page=filings

Osorico
 
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