IB - Portfolio Margin have higher requirement than Reg-T!!!

Quote from osho67:

Well. IB can give realised profit, unrealised profit , net liqidation value position by position - so why not margin usage position by position,

Sometimes when I do a naked e.g. on FAS margin requirement is very high. But what about positions I have already done. ?
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I always check the margin impact of any trade that I do by entering the order (before transmitting) and then right clicking and selecting margin requirements. For existing orders, you can try to put a fake order to close the poition and then see the margin impact of it. Sometimes adding a position actually improves your margin instead of reducing your margin. For example, if you have a naked ITM call, buying the underlying improves your margin.
 
Quote from cdcaveman:


portfolio margin accounts are sometimes given out to people that don't deserve them haha...
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Sure! because SPY can move down to $80 on a PMargin but not on Reg-t!
Seriously, the type of the account doesn't affect the stock/option price, if you sell a strangle at 6.00 and it is trading now at 10.00, you are going to lose $400 per position closed no matter what account type you have.
 
Quote from ofinance:

Do you mean that with 3 strangles you get 35K margin requirement but with 5 strangles it would have been only 15k or 16K? if thats the case one can add 2 more strangles, lets say on DELL and MSFT and have less cash tied up but that doesn't make sense considering most of these stocks are tech stocks and move the same way, also, with 5 strangles there is always more delta mouvement than with 3.
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Just because they are tech stocks doesn't mean they are all highly correlated (and they aren't).
If you think about it then it makes a lot of sense, any corporate scandal can move the stock 50% in a day - it has happened before. The likelihood of 2 extremely significant corporate scandals happening exactly at the same time is however very unlikely, more so 3.
 
Quote from cdcaveman:

IB will tell you exactly why the requirment is the way it is..
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This is not the case.

IB explained why in another thread about Portfolio Margin:

Quote from ids:

The problem with explanation of portfolio margin is complexity. Even if a person understands all the rules, application of these rules depends on a ton of numbers produced by the OCC and in house (IB) every day. One will have a huge problem to put it all together even if we publish everything. For example, I know all the rules and have an access to all the numbers. Let's say the portfolio is relatively simple. I will have a hard time to calculate margin manually. I cannot do it without help of a pretty complex computer program. How to explain it to a customer in a relatively simple form?
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http://www.elitetrader.com/vb/showthread.php?s=&postid=3374153#post3374153
 
Quote from Jay_Ap:


Here is the thinking behind this assertion:

The net delta of the strangle position would start to move to maybe somewhere around 0.7 (just a guess at this point) due to the imp vol stress move and the 15% stress move on the goog price. This means you would be incurring a loss at about 0.7 multiplied by the stress move (0.7 * 15% = 10.5%). GOOG is trading at around $632 and $632 times 10.5% equals $66.36. We then multiply this by 100 shares and end up with $6636.

So, $6636 should be the PM margin requirement just for the GOOG strangle. Using similar calcs for the other positions (and making adjustments based on index type, etc) I get:

AAPL = $6,405
GOOG = $6,636
SPY = $767

This means the total Portfolio Margin requirement should be somewhere around $13,808. So, yes, I think there may be some IB position concentration pixie dust being sprinkled onto your margin requirements.

-Jason
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Jason, using your methodology, what would the total margin requirement look like if the three strangles in this example were stressed to 30% moves on the underlying?

Thanks in advance.
 
Quote from Options12:

Jason, using your methodology, what would the total margin requirement look like if the three strangles in this example were stressed to 30% moves on the underlying?

Thanks in advance.
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At a 30% move, the average delta of the position is likely to end up closer to let's say 0.85 on average (bigger move means one of the options is more in the money). So, taking this into account, you end up with margin requirements as follows:

Percent_Move * Share_Price * Quantity * Delta = Margin_Req.

1. GOOG: 0.3 * 632 * 100 * 0.85 = $16,116
2. AAPL: 0.3 * 610 * 100 * 0.85 = $15,555
3. SPY: 0.3 * 138 * 100 * 0.85 = $3,519

If you sum these numbers you get a total margin req of: $35,190
 
Quote from Options12:

Maybe that explains it. The calculation contemplates moves up to 30% due to the limited number of underlying positions.
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You could be right and it would be a prudent decision on IB's part. If I was writing the specs for IBs Portfolio Margin system, I would certainly impose a substantial position concentration penalty. 30% seems well within the realm of reason.

-Jason
 
Quote from Jay_Ap:

I would certainly impose a substantial position concentration penalty. 30% seems well within the realm of reason.

-Jason
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I want to ask you this, if you had more than $100,000 equity, would you apply for Pmargin or stay with Reg-T?
 
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