I have never had a margin sellout, but a friend asked me a question that I do not have an answer. Say you own 1000 shares of a stock on margin that has gone down enough to be in a margin call situation. I know that IB automatically sells you out, but how much do they sell? Do they sell just enough to get back within maintenance margin requirements, initial margin requirements, or the whole position? Do they sell odd lot amounts, say 512 shares. How does all this work?
IB Margin sellouts
- Thread starter stevene9
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def
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good question, for futures it just liquidates the number of lots necessary to bring the account to compliance. For stocks, it will try to liquidate in even lots (multiples of 100) last in first out. (ie. if you have 5 different stocks, the last one traded would be the first liquidated).
def - does it liquidate enough (for stocks) to bring it into maintenance margin requirements, or initial margin requirements. The reason I ask this is theoretically, the first second you violate maintenance margin you need only sell 1 share of stock to put it back into maintenance compliance. I would think that they might want to sell enough to get into initial compliance, but I'm not sure what the rules are. If they just keep you within maintenance requirements, what are the rules regarding how much is sold. Do they sell 10 shares, and if it goes down another tick they sell another 10 shares. I doubt it. How does it work?
I reread your reply about the 100 shares so let me rephrase my question. Suppose someone owns 20,000 shares on margin. When you hit maintenance margin call would they only sell 100 shares, which would immediately put you back into maintenance compliance. Another few cents down, and they would have to sell another hundred shares, and so on. Do they really do this? The bottom line question which you did not address - when they sell to bring you back into compliance, which compliance. Do they only sell to bring you back into minimum amintenance requirement, or do they bring you back up to initial maintenance requirement? Thanks.