IB Margin requirements

FutureScalper · Aug 28, 2007

Quote from jimrockford:

How much margin do you think would be enough, and how meaningful will price history be toward answering this question, the morning after terrorists, who infiltrated the U.S. thru its unenforced Mexican border, detonate the first nuclear or radiological attack ever to occur on American soil? Do you think that IB's auto-liquidation algorithm will save the day?

My god, I just realized he may be right !!! I didn't realize how much "at risk" Interactive Brokers and similar companies have been ALL THESE YEARS.

How did they make any money? My eyes have been opened.

FS

jimrockford · Aug 28, 2007

Quote from FutureScalper:

My god, I just realized he may be right !!! I didn't realize how much "at risk" Interactive Brokers and similar companies have been ALL THESE YEARS. How did they make any money? My eyes have been opened.

FS

Any fool can make money, by taking idiotic risks. Lots of people on ET are idiots who make money easily by taking excessive risks. This continues until the day of reckoning comes and all their gains are wiped away.

It takes some brains and some risk control to keep making money over the long term, and to keep those profits over the long term, and to survive those inevitable days of reckoning when the fools will be punished for making money recklessly.

OldTrader · Aug 28, 2007

Quote from jimrockford:

How much margin do you think would be enough, and how meaningful will price history be toward answering this question, the morning after terrorists, who infiltrated the U.S. thru its unenforced Mexican border, detonate the first nuclear or radiological attack ever to occur on American soil? Do you think that IB's auto-liquidation algorithm will save the day?

Understand that IB is first protected via margin, and next protected by all of your other assets. Presumably IB "knows their customer".

However, I'm sure you must know that the move on 9/17/2001, the first day of trading after 9/11, was approximately a 54 handle move down, less than some of the moves we've had recently. In other words, the 54 point OVERNIGHT move was covered by margin.

INTRADAY margin of 70 points is extraordinary.

Your flights of fancy aside, it looks to me like IB has gone well beyond what is necessary for their safety intraday.

OldTrader

FutureScalper · Aug 28, 2007

OldTrader,

Of course I think you've spoken wisely, and all we ( I ) am asking of IB is to be "reasonable" in their intraday margin hikes, and to restore the "status quo ante" (or something near to it) ASAP !!!!!

FS

chauncey1 · Aug 28, 2007

First of all i have to say that i prefer this kind of procedure over those brokers offering $500 /intraday margin or the classic "forex ad" saying that you can trade 200x margin. You know how these stories ends...

Besides that, i guess IB freaks out with the ES movement on mid-Aug while we experienced pretty much volatile (or as much as the Es handle) movements on another products (like the wildest move on ZN/ZB on June when wildest 64 ticks moves could kill an account in just a couple of hours).
Even so, NG had wild moves recently and on 2006 enough to kill an account in hours.

SO, what's different now? Nothing, just the stupid crowd gets upset by a few ES points and they follow...

Besides this, i think overnight margin over intraday margin looks unfriendly but -in many cases- could be a great "favor" for the small trader who eventually loses their mind and loses all.
So, what today looks like "unfriendly" could save many asses tomorrow.

jimrockford · Aug 28, 2007

Quote from OldTrader:

Understand that IB is first protected via margin, and next protected by all of your other assets. Presumably IB "knows their customer".

However, I'm sure you must know that the move on 9/17/2001, the first day of trading after 9/11, was approximately a 54 handle move down, less than some of the moves we've had recently. In other words, the 54 point OVERNIGHT move was covered by margin.

INTRADAY margin of 70 points is extraordinary.

Your flights of fancy aside, it looks to me like IB has gone well beyond what is necessary for their safety intraday.

OldTrader

You overlook the danger that the infrastructure of trading could be unexpectedly interrupted in the middle of a trading day, before there is any opportunity for margin liquidations. Perhaps this danger might justify setting intraday margin requirements equal to overnite requirements. Won't you agree that it is impossible to gauge this risk by examining price histories, without adding some further additional analysis?

Don't you think, more generally, that it is important to consider events which have no precedent, yet pose a substantial danger? Your way of relying on price histories assumes that there will be nothing new, that there will be no catastrophic events. Don't you see the flaw in assuming that future prices will always behave within the volatilities established by past prices?

rayl · Aug 28, 2007

Quote from jimrockford:

You overlook the danger that the infrastructure of trading could be unexpectedly interrupted in the middle of a trading day, before there is any opportunity for margin liquidations. Perhaps this danger might justify setting intraday margin requirements equal to overnite requirements. Won't you agree that it is impossible to gauge this risk by examining price histories?

Don't you think, more generally, that it is important to consider events which have no precedent, yet pose a substantial danger? Your way of relying on price histories assumes that there will be nothing new, that there will be no catastrophic events. Don't you see the flaw in assuming that future prices will always behave within the volatilities established by past prices?

Though, is there any way to economically protect against a 20 sigma financial market event? Curiously, it's been almost 20 years since one...

abxs · Aug 31, 2007

Quote from jimrockford:

You overlook the danger that the infrastructure of trading could be unexpectedly interrupted in the middle of a trading day, before there is any opportunity for margin liquidations. Perhaps this danger might justify setting intraday margin requirements equal to overnite requirements. Won't you agree that it is impossible to gauge this risk by examining price histories, without adding some further additional analysis?

Don't you think, more generally, that it is important to consider events which have no precedent, yet pose a substantial danger? Your way of relying on price histories assumes that there will be nothing new, that there will be no catastrophic events. Don't you see the flaw in assuming that future prices will always behave within the volatilities established by past prices?

By your reasoning margin should at all times be like 10 times as much as what is necessary under "normal" circumstances...

gkishot · Aug 31, 2007

Quote from abxs:

By your reasoning margin should at all times be like 10 times as much as what is necessary under "normal" circumstances...

Good point - how much is too little, how much is enough?

jimrockford · Aug 31, 2007

Quote from abxs:

By your reasoning margin should at all times be like 10 times as much as what is necessary under "normal" circumstances...

No, you just don't understand my reasoning. Go back and read it again.