IB margin
- Thread starter gwac
- Start date
If your base currency is CAD, your trade in cable will generate cash positions in USD and GBP. How you got the positions will no longer matter.
We will apply margin in CAD = 2%*GBPposition*xrateCAD/GBP + 2%*USDposition*xrateCAD/USD
100K GBP will be 2K GBP margin, at current prices, roughly 4000 CAD. If you got into it via USD, then your USD position should be of roughly equal value and will also produce 4000 CAD margin, together 8K.
Please email me if this is not the case. I set up the FX trading model so if it doesnt work the way I said I need to figure out what is going on.
I understand what`s happening, i do not think it makes alot
of sence. Why would you need double margin for
a gbp/usd position on a Cad account, when you would not
need it for USD account. It is not double the risk for
IB, it actually is a less volitile pair than gbp/cad.
I think your system should just take the usd equivalent
and multiple by the USD/CAD exchange and make
that the margin required.
You guys lose out for no reason because it cuts down
on the size of positions for no reason.
UOTE]Quote from IBj:
If your base currency is CAD, your trade in cable will generate cash positions in USD and GBP. How you got the positions will no longer matter.
We will apply margin in CAD = 2%*GBPposition*xrateCAD/GBP + 2%*USDposition*xrateCAD/USD
100K GBP will be 2K GBP margin, at current prices, roughly 4000 CAD. If you got into it via USD, then your USD position should be of roughly equal value and will also produce 4000 CAD margin, together 8K.
Please email me if this is not the case. I set up the FX trading model so if it doesnt work the way I said I need to figure out what is going on. [/QUOTE]
of sence. Why would you need double margin for
a gbp/usd position on a Cad account, when you would not
need it for USD account. It is not double the risk for
IB, it actually is a less volitile pair than gbp/cad.
I think your system should just take the usd equivalent
and multiple by the USD/CAD exchange and make
that the margin required.
You guys lose out for no reason because it cuts down
on the size of positions for no reason.
UOTE]Quote from IBj:
If your base currency is CAD, your trade in cable will generate cash positions in USD and GBP. How you got the positions will no longer matter.
We will apply margin in CAD = 2%*GBPposition*xrateCAD/GBP + 2%*USDposition*xrateCAD/USD
100K GBP will be 2K GBP margin, at current prices, roughly 4000 CAD. If you got into it via USD, then your USD position should be of roughly equal value and will also produce 4000 CAD margin, together 8K.
Please email me if this is not the case. I set up the FX trading model so if it doesnt work the way I said I need to figure out what is going on. [/QUOTE]
I actually brought up the same issue sometime
ago, but I got no satisfactory answer from IB.
My calculations also say that the risk of such a position is less
than double, so IB's margin model must be wrong.
(Unless I am wrong.... please corrent me.)
Also, the increased 3,33% margin requirement for
JPY on the grounds that it's more risky than other
currencies must be wrong.
Finally, the interest rate deals at IB aren't good at all.
If you trade the minimum size (25K for USD),
it's practically impossible to have a positive interest carry trade
for most pairs that you should have.
If I remember correctly, they charge and extra 1.5%
over the base rate for short positions, and they deduct
a 0.5% from the base rate for long positions. To make
things worse the first few thousands of a long position
don't receive any interest at all.
Just to give a idea of the magnitude of the (hidden) costs
that such a deal introduces:
I had been trading on IB's IDEALPRO for a few months
without considering at all interest rate differentials
(thus, I could end the day carrying positive or negative
interest trade with a probability of 50%).
At the end of *every* month I had to pay interest.
That interest amounted on average around 3% of my account.
That's reallly too much! (Let's not talk about commissions)
The interest rate situation is much better elsewhere.
Eventually, I changed forex broker and my overall costs
are now much lower.
However, despite the high costs I had a good experience
trading in IDEALPRO's ECN. I would consider getting back
if the deal improves considerably.
Yes that is it.
When two non-base currencies are involved, then there are 2 times an foreign exposure against your base-currency (CAD). In which case IB calculates 2 times margin.
But you can solve it by changing your base-currency to USD (instead of CAD)...which I advise when you only trade Forex at IB and when you mostly trade pairs without CAD involved.
In such a case only one time Margin is calculated (because only one non-base currency is involved).
Changing your base-currency can be done in Account-management.
They are supposed to be lowering the Yen margins to 2% --. 3.33% is too high. I have not been wacked 3% over interest rates -my experience has been more positive--I have my base currency set to dollars. I would advise anyone that trades Ideal Pro --to switch their base currency to dollars.