IB trashes account - what would TOS do?

[blackjack007]

Quote from lejmorro:

Guys, thank you, you are right! I hear you. I let my margin ratio get too high.

OK, then what is your maximum margin ratio in your account? 25%? 40%? higher? Presumably whatever it is, it will cover you from an unexpected assignment of say 10 short put contracts of SPY worth about $100K?

how much 'play' you leave depends on the margin computation of your broker and your positions. for something very volatile like occ-tims or span, i only use about 5-7% of available margin. for ib's pm, i would use about 15%. for reg-t, i'd use more because it's fairly stable.

the other thing is, i trade index options so i don't worry about assignment.

 

[newguy05]

Quote from deanrumble:

IB did the same thing to me a little while ago. BUT the problem was that before I even decided to do credit spreads; I first phoned IB's customer service and asked what would happen if my short side got assigned; I was told that I had 10 minutes from the open to exercise my long side. So I thought : "Great, I 'll just monitor my positions every morning if I'm ever in a position to get assigned."

So when I woke up one morning to find that I had been assigned; I thought: " No problem I'll just open the exercise window and exercise my long puts" The problem was that the exercise window was no longer where I thought it was. So while I was searching for it (as TWS seems to like closing features that are not used frequently) I also phoned customer service because I still had plenty of time before the open. I got through to customer service and he informed me that even if I exercised my long puts; they wouldn't be acknowledged by IB until the next day........ I then explained to him that was not what the last custmer rep said. He then ignored me and told me that I would start getting auto-liquidated if I didn't start selling something on my own.

So after he informed me that by exercising my long puts I wouldn't get flat; I then saw my only other alternative was to sell my long puts and the assigned stock (taking a much larger loss) THEN the next problem was that TWS wouldn't allow me to sell my Long puts!!!!!!! This was the day that the Dow dropped 700 points in the morning and then bounced back up. My account started getting auto-liquidated and there was nothing I couild do about it!!! UNTIL the market moved back up and my puts were worth a lot less. then I was able to sell my puts! Oh yeah and IB had liquidated my assigned stock at the worst possible price!!!

Needless to say this all happened because I phoned their customer service and got connected to someone who was absolutley clueless about IB's own exercise policy. I called IB's customer service a few times since and there are still some reps saying that IB's exercise is immediate and others saying it is delayed by a day.

I know your situation is slightly different, but just in general:

1) It's a very difficult to trade options as a retail when market makes large moves. For example the es option market is pretty much nonexist when the sp500 was gapping down 50+ pts, the bid/ask spread was all in the 10-40pt range. Only the front month atm strikes has some acceptable spread.

2) It's the worst and most likely time you will get liquidated from IB. Really is a nightmare because there is no market and IB wont let you do anything to adjust. So all you can do is watch as it close your position at MARKET when the bid/ask is 40pt wide.

3) This is a hard lesson, always make sure you have plenty of excess liquidity relative to the positions you held. Especially when the market is violatile.

4) The only emergency recovery i can think of is a direct wire transfer from your bank to IB, to bring excess liquidity back up so you can close out the position YOURSELF by doing limit orders instead of the IB engine at firesale.