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IB trashes account - what would TOS do?
- Thread starter lejmorro
- Start date
Quote from newguy05:
Reverse calendar spread has well defined risk .
A reverse calendar has no such 'well defined' risk.
If IV doubles and doubles again, how much would you lose?
If you use 'portfolio margin' the following does not apply to you. But, if you use Reg T margin, then a reverse calendar is considered to be 'naked short' the longer-term option. The margin requirement is rather high for naked short options - especially index options where the price of the underlying asset is a big number.
Switching from IB is a big decision and I'm hoping to avoid it. How about you?
Mark
Any time a customer has margin issues, then I think it is hardly any right to question how the broker liquidates. They make it clear they are aggressive.
IB is ultra conservative. That is why I like them.
IB is ultra conservative. That is why I like them.
Quote from Kalparker:
That's what you get one a computer is set up to manage and watch margin levels. I wouldn't be surprised had a human seen the account he would of performed a more beneficial action.
Sure. Anyone would have done better. But they have too many accounts and too few people. They give you anywhere from zero to ten minutes to handle a margin problem.
No humanity, no empathy.
At least the computer can inefficiently and quickly blow out positions - and that's all IB cares about.
Mark
Quote from dagnyt:
A reverse calendar has no such 'well defined' risk.
If IV doubles and doubles again, how much would you lose?
If you use 'portfolio margin' the following does not apply to you. But, if you use Reg T margin, then a reverse calendar is considered to be 'naked short' the longer-term option. The margin requirement is rather high for naked short options - especially index options where the price of the underlying asset is a big number.
Switching from IB is a big decision and I'm hoping to avoid it. How about you?
Mark
Mark, it's true if you write reverse calendar spread the loss from IV gap is unlimited. But the IV did not gap yesterday, it actually crashed, also i only opened the position because IV was already at 60+. The other thing is when IV gaps, the underlying usually makes a large movement as well which offsets some of the losses from vega.
I modelled the position before opening the trade, basically if the underlying makes large movements to the upside then your front month becomes ditm and the position has a long gamma and if it makes a large movement to the downside then your front month becomes otm and position has short gamma. The biggest enemy to me is theta if the position does not move and iv remains constant.
I am sure you know all of this, but my point is i dont understand why my margin(excess liquidity) would change so much in 1 day when the position was moving in my favor. I am convinced there was some margin requirement change to the es that made this happen, it does not make any sense to me.
Also IB definitly does not treat reverse calendar spread as a naked short, the reg t margin requirement to hold the 1 combo is roughly $1500 which is way less than holding a short naked put/call
Quote from dagnyt:
Sure. Anyone would have done better. But they have too many accounts and too few people. They give you anywhere from zero to ten minutes to handle a margin problem.
No humanity, no empathy.
At least the computer can inefficiently and quickly blow out positions - and that's all IB cares about.
Mark
then find a broker with more love.
Quote from TraderZones:
Any time a customer has margin issues, then I think it is hardly any right to question how the broker liquidates. They make it clear they are aggressive.
IB is ultra conservative. That is why I like them.
Sure. No arguement with that.
But they don't have to set up the algorithm to randomly select one option and close (at the market) and then another and another until margin is met.
There are much more efficient ways to correct margin immediately.
I have no argument with the 'let's do it immediately' scenario - although I would prefer a two minute delay until the account is updated to see if margin call is still required.
But there is no need to buy/sell at the market when the markets are as wide as they are now. I know they cannor 'work' the order, but they can bid 75% of the bid/ask differential for 5 seconds before paying the offer. They could 'try' to treat customer fairly. After all, if they hurt the customer, it's a customer they lose.
And a little portfolio analysis would show which is the most efficient position to close. After the assignment, it was obvious to anyone - even a computer - where the margin violation originated - and that should have been the only position closed.
Yes, the poster should have paid closer attention, but there is no need to PUNISH a customer.
Mark