IB Options margin question

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praetorian2

Hey,

I tried to contact IB about this, and their response to me was that they do not explain their own margin policies. (Even though my question was about not understanding their policy).

Anyway, I have 2 questions.

Yesterday I wrote 3 SEPT 1040C SPX option contracts. I received $350. Assuming that it didn't move and was still offered 3.5, what would my current margin requirement be?

I wrote 40 SEPT QQQ 34c option contracts. They are now offered at .15 What is my margin required to hold them?

These are both naked positions.

This is from IB's site.

Initial and Maintenance: 100% * option market value + maximum (((20% * underlying market value) - out of the money amount), 10% * underlying market value, $250 * number of contracts). 20% above is 15% for broad based index options. Short sale proceeds are applied to cash.

I would appreciate any help. Thankyou.
 
When in doubt read the instructions.

All of the information you need is on the IB website, so read the option margin requirements there and apply them to get your answer.

I've placed many option positions through IB and their stated margin formulas work like clockwork.
 
I am sure they work fine. I just wanted to know what the req's are.

I wrote about 4500 in premiums and it is eating up over 100k in bp I think. I wanted to know why or which positions out of those are the ones eating most of the BP.
 
Quote from praetorian2:

. I wanted to know why or which positions out of those are the ones eating most of the BP.
More...

I have never concerned myself with the formulation of the margin -

On the order line simply right click and and do the "check margin" . Can do it for as many as you wish to buy or sell.

If you have open positions it will figure in that also with the new margin for the "what-if scenario." So I just generally do the calculation on 1 contract and you will have it per contract.

You may know all this already....

Make 'em pretty, Chris
 
Part of the lack of reply from the help desk is that there are different requirements by product, market, and exchange. For most options the formulas on the web site are correct. For index options which fall under SPAN margining, the exchange provides a SPAN table with parameters. Those parameters are used to take the worst case scenario when moving price, volatility, interest rates, etc. and use that as the margin. To get accurate margin levels with SPAN, you'll need a SPAN calculator.

Now to hedge myself..... I don't know which parameters the options you traded fall under :)
 
Quote from def:

Part of the lack of reply from the help desk is that there are different requirements by product, market, and exchange. For most options the formulas on the web site are correct. For index options which fall under SPAN margining, the exchange provides a SPAN table with parameters. Those parameters are used to take the worst case scenario when moving price, volatility, interest rates, etc. and use that as the margin. To get accurate margin levels with SPAN, you'll need a SPAN calculator.

Now to hedge myself..... I don't know which parameters the options you traded fall under :)
More...

I may be mistaken here, but from my experience, the SPAN applied to futures index options, not cash index options. I have always found that the cash index options have fallen under that simple formula of 15% x value of cash index less proceeds.

Either way, I was going to suggest to Praetorian that one way to reduce your margin outlay is to simply use an "anchor" strike on your far OTM short calls position. For instance, if short the 1040's, you could spread against the 1080's or 1100 for very little cash outlay and reduce your margin outlay without giving up too much of the premium from a naked position...
 
Quote from praetorian2:

Thank you DEF and Vulture.

Def- Is there any way I can calculate this on the API?
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I don't know much about the API functionality. I'll try to find out and send you a PM. In the meantime, a good place to ask this question is on the ib web site disccussion board under TWS API (lots of good info/assistance there).
 
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