Improve the Interactive Brokers margin system.

R

raf_bcn

Hi


As I said before I am new in the world of trading. I opened an Interactive Broker account two molths ago.
I would like to explain what happened this week.

I have an option position in Spy that the maximum risk for my account is 40,00 per contract.
It is a multiple leg position, almost totally hedged. But IB takes a margin of 4.000,00 from my account.
And this is because the IB Margin System, or their algorithms, doesn't recognize that position, yes, one of the best Brokers, if not the best,
in the world.

It is not the first time it happens, and the previous times I resolve it by moving one strike one of the legs. By doing this,
the IB margin system does recognize the position and immediately decreases the margin to 40,00 dollars per contract, instead of 4.000,00 .
Look they take 100 times the margin that should be, a 5.000% more, that's incredible.

But this time I opened a tiket and explained the situation. But they don't want to understand. I have asked to
send the tiket to the Margin system developing team, because for sure They want to improve the system, but the answer was
that a Broker Dealer can charge any amount for a position's margin requirement.

A little disappointment, because for sure is easy to fix the problem, so They take a fair margin.
Maybe I didn't talk to the right guy.

Also want to say that absolutely I dont have nothing to complaint about the treatment and the answers, because they were kind and polite.
 
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raf_bcn said:
Hi


As I said before I am new in the world of trading. I opened an Interactive Broker account two molths ago.
I would like to explain what happened this week.

I have an option position in Spy that the maximum risk for my account is 40,00 per contract.
It is a multiple leg position, almost totally hedged. But IB takes a margin of 4.000,00 from my account.
And this is because the IB Margin System, or their algorithms, doesn't recognize that position, yes, one of the best Brokers, if not the best,
in the world.

It is not the first time it happens, and the previous times I resolve it by moving one strike one of the legs. By doing this,
the IB margin system does recognize the position and immediately decreases the margin to 40,00 dollars per contract, instead of 4.000,00 .
Look they take 100 times the margin that should be, a 5.000% more, that's incredible.

But this time I opened a tiket and explained the situation. But they don't want to understand. I have asked to
send the tiket to the Margin system developing team, because for sure They want to improve the system, but the answer was
that a Broker Dealer can charge any amount for a position's margin requirement.

A little disappointment, because for sure is easy to fix the problem, so They take a fair margin.
Maybe I didn't talk to the right guy.

Also want to say that absolutely I dont have nothing to complaint about the treatment and the answers, because they were kind and polite.
More...
The reason why we like IB is because they're overly cautious.
Why don't you try to close your position instead of hedging it with an opposite direction trade ?
Unless you are trading option, this is a pretty common way of trading.
 
Ib has been around at least 35 years and has been using this system that has seen lots of market cycles and shocks imaginable , hence they are probably not going to change..
 
raf_bcn said:
Hi


As I said before I am new in the world of trading. I opened an Interactive Broker account two molths ago.
I would like to explain what happened this week.

I have an option position in Spy that the maximum risk for my account is 40,00 per contract.
It is a multiple leg position, almost totally hedged. But IB takes a margin of 4.000,00 from my account.
And this is because the IB Margin System, or their algorithms, doesn't recognize that position, yes, one of the best Brokers, if not the best,
in the world.

It is not the first time it happens, and the previous times I resolve it by moving one strike one of the legs. By doing this,
the IB margin system does recognize the position and immediately decreases the margin to 40,00 dollars per contract, instead of 4.000,00 .
Look they take 100 times the margin that should be, a 5.000% more, that's incredible.

But this time I opened a tiket and explained the situation. But they don't want to understand. I have asked to
send the tiket to the Margin system developing team, because for sure They want to improve the system, but the answer was
that a Broker Dealer can charge any amount for a position's margin requirement.

A little disappointment, because for sure is easy to fix the problem, so They take a fair margin.
Maybe I didn't talk to the right guy.

Also want to say that absolutely I dont have nothing to complaint about the treatment and the answers, because they were kind and polite.
More...

I might have missed it, but is this Reg-T or PM?
 
wintergasp said:
The reason why we like IB is because they're overly cautious.
Why don't you try to close your position instead of hedging it with an opposite direction trade ?
Unless you are trading option, this is a pretty common way of trading.
More...

And here was me thinking people like them for their API, relative friendliness to international customers, commissions (for some) and the wide choice of markets. Their margin system is one of their worst features, it's not overly cautious but rather something that's dated.
 
It is a pm account.

The strategy doesn't have more risk than what i said. That is for sure.
Let's say it is a short strangle 100/150
and a long strangle 99/150
The IB algorithms doesn't recognize that is one combo, because of the 150, that's the same in the long an the short. And
they take margin as if there was a naked position.

But if I close the long 150 and open a 151, automatically recognizes the position and the margin required drops. Observe that
the first position is a less risky position than the second one, but the margin required is 100 times higher.
Obviously is a problem of their Margin system algorithms.
 
For a PM account, they should look at your entire SPY position risk in total, not as the spreads you put on. If it is a small set of positions, I can run it on our risk or the OCC website and tell you what the OCC requires, and you can compare that to what IB come up with and see what their risk component is.

Just email me the positions.

Bob
 
Hi

Sorry I have a Margin account, not a Portfolio margin account.
I have to rectify, after looking closely.
-An existing account must have at least USD 110,000 (or USD equivalent) in Net Liquidation Value to be
eligible to upgrade to a Portfolio Margin account - And that is not my case.

So what I exposed it's right, it's a margin requirement for one particular position.

IB offers the possibility to compare the current Reg T margin requirements for the portfolio with those current projected under Portfolio Margin rules.
And I have seen an interesting think. My current margin would drop from 100 to 1 with a portfolio margin account. All my postions are in Spy.
For sure IB uses better algorithms for pm.
 
IB (and every clearing broker) uses an option optimizer to pair off your positions into spreads. What is the exact positions and what is your requirement for all of SPY? To be fair, I'm more of an expert on PM than Reg-T.
 
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