IB on iron condors and new margin rules

nixodian · Jul 22, 2013

how do the new margin rules for iron condors as detailed in http://www.moneyshow.com/trading/article/42/VideoTransTr-30529/Changes-in-Option-Margins/
effect those who open an iron condor with the call side say 5points wide and put side 2 points wide with IB, is this even possible with IB since the software has the iron condor setting set equally apart for the call and put side. so to do a 5 point and 2 point iron condor (or credit spreads), would it be seen as 2 credit spreads and we have to put up margin for 7 points? rather than 2 with the new rules.

noregrets · Jul 22, 2013

Not sure about the new margin rules, but you should be able to build any iron condor you want by adding the legs in individually in SpreadBuilder within OptionTrader. It will quote whatever legs you enter all as one order.

osho67 · Jul 23, 2013

Quote from noregrets:

Not sure about the new margin rules, but you should be able to build any iron condor you want by adding the legs in individually in SpreadBuilder within OptionTrader. It will quote whatever legs you enter all as one order.

Can you enter six legs there? Thanks

stevegee58 · Jul 23, 2013

All these questions can be answered by simply opening up TWS and playing around with the option trader screen.

On IB you can create an arbitrary option spread up to 4 legs. 6 legs is not possible as 1 spread.

They have canned "standard" spreads but you can create variations such as unbalanced butterflies and unbalanced iron condors.

Regarding margin, if you open a standard iron condor where the strike difference on each side is equal then the margin used is the strike difference.
e.g. call side difference = put side difference = 25: margin = 25

If you make the strike difference on the call side different from the put side then the margin used is the sum of the 2 differences.
e.g. call side difference = 25, put side = 50: margin = 75

nixodian · Jul 23, 2013

Quote from noregrets:

Not sure about the new margin rules, but you should be able to build any iron condor you want by adding the legs in individually in SpreadBuilder within OptionTrader. It will quote whatever legs you enter all as one order.

If you ever used option trader with IB you will know you use the "Option spreads" ,combo or leg by leg selection to create an iron condor,
but either way IB have informed me that if a 5 point wide call credit spread is combined with a 2 point wide put credit spread, 7 points in margin is required.

nixodian · Jul 23, 2013

Quote from stevegee58:

All these questions can be answered by simply opening up TWS and playing around with the option trader screen.

On IB you can create an arbitrary option spread up to 4 legs. 6 legs is not possible as 1 spread.

They have canned "standard" spreads but you can create variations such as unbalanced butterflies and unbalanced iron condors.

Regarding margin, if you open a standard iron condor where the strike difference on each side is equal then the margin used is the strike difference.
e.g. call side difference = put side difference = 25: margin = 25

If you make the strike difference on the call side different from the put side then the margin used is the sum of the 2 differences.
e.g. call side difference = 25, put side = 50: margin = 75

Yes thats how IB informed me but with the new margin rules, if a broken wing iron condor is created its only 50 margin as opposed to 75 that would be required as in your eg

osho67 · Jul 24, 2013

Quote from nixodian:

Yes thats how IB informed me but with the new margin rules, if a broken wing iron condor is created its only 50 margin as opposed to 75 that would be required as in your eg [/QUOT

It is difficult to understand portfolio margin a/c with IB. Sometimes when I initiate a new order and chech margin , I get a credit in margin and sometimes when I close an order I am asked to pay more margin. ( for credit spreads or iron condors to earn credit. )

nixodian · Jul 24, 2013

Quote from osho67:

Quote from nixodian:

Yes thats how IB informed me but with the new margin rules, if a broken wing iron condor is created its only 50 margin as opposed to 75 that would be required as in your eg [/QUOT

It is difficult to understand portfolio margin a/c with IB. Sometimes when I initiate a new order and chech margin , I get a credit in margin and sometimes when I close an order I am asked to pay more margin. ( for credit spreads or iron condors to earn credit. )

More...

Its not portfolio margin a/c, its the new rules for broken wing iron condors as detailed in article in 1st post. It does overlap some of the benefits portfolio margin accounts have.
everyone is suppose to benefit via their brokers but IB don't recognise broken wing iron condors beneficial new margin rules

osho67 · Jul 24, 2013

Quote from nixodian:

Its not portfolio margin a/c, its the new rules for broken wing iron condors as detailed in article in 1st post. It does overlap some of the benefits portfolio margin accounts have.
everyone is suppose to benefit via their brokers but IB don't recognise broken wing iron condors beneficial new margin rules

I donot understand this "broken wing". I execute iron condors which have equal no of points spread in calls and puts. Please explain. Thanks

nixodian · Jul 25, 2013

Quote from osho67:

I donot understand this "broken wing". I execute iron condors which have equal no of points spread in calls and puts. Please explain. Thanks

just google it! loads on it, can use it if more bullish than bearish for eg but i'll give quick eg, if going to do a broken wing iron condor (where the call and put side widths differ) on SPY, eg 163c 170c 158p 150p
you'd have to put up 7 points on call side and 8 points of margin on the put side, total 15points in margin. with the new margin rules as detailed in my 1st post you'd have to commit only 8 points in margin saving 7 points to do alternatives.
IB can't let us taken advantage of these beneficial margin rules, so to do this broken wing iron condor, we'd have to open two credit spreads costing us 15 margin points