Interactive Brokers Charges to Accounts with Worst-Case Loss Exposure

[chtrader]

You wrote "the number 1.76 doesn't mean anything to me".

It's about $2.

Right...

Well, why not $1 or $10? or? Their proprietary algorithm determines it, so it can be any number?

 

[chtrader]

This has been around for years. There's barely any leverage available anyway.

As I said, I've been trading for over a decade, but I've never seen this. And the leverage thing is actually a good thing, since small accounts have a much higher chance of blowing up. But you need to be able to handle big accounts.

 

[d08]

As I said, I've been trading for over a decade, but I've never seen this. And the leverage thing is actually a good thing, since small accounts have a much higher chance of blowing up. But you need to be able to handle big accounts.

It's good up to a limit. In the end risk should be shifted more to traders and not brokers. Brokers should be middlemen, as they were initially.

 

[Millionaire]

Well, I've been trading for over a decade, but I've never seen this.

There is this thread from 2014, https://www.elitetrader.com/et/threads/ib-exposure-fee.284323.

 

[chtrader]

There is this thread from 2014, https://www.elitetrader.com/et/threads/ib-exposure-fee.284323.

Thanks, interesting but long thread.
There's another thread at reddit which explains that whenever you make a trade you can see if it impacts your exposure fee. I checked it and it is displayed e.g. in the order preview window.

One of the things mentioned in the Elite thread was:
IB says "Exposure Fees only apply to a small minority of IB customer accounts with unusually risky positions."

But I have been doing this for a long time, and never have I been charged this fee. Strange...

One thing that's different is that I started withdrawing money from my account...

 

[chtrader]

It's good up to a limit. In the end risk should be shifted more to traders and not brokers. Brokers should be middlemen, as they were initially.

Yeah, it's funny, I've blown up many accounts and took on very risky positions again and again, but never have I been charged this fee before.

 

[d08]

Yeah, it's funny, I've blown up many accounts and took on very risky positions again and again, but never have I been charged this fee before.

The instruments you trade had risk reassessed. I've never blown up depending on the definition but I've still gotten that tax.

 

[chtrader]

The instruments you trade had risk reassessed. I've never blown up depending on the definition but I've still gotten that tax.

I'm trading the same instruments I've been trading for years NQ futures (of which the margin has increased dramatically over the years BTW). I've stopped blowing up accounts though, instead starting to withdraw money.

 

[murray t turtle]

It appears they let people load up on futures contracts because the IB risk algo had not been told that prices could go negative.

Like if a stock is $1, the max loss on a long position is $1, so a broker will happily let you buy 10,000 shares if you have a $10K account. The broker isn't going to lose anymore.

IB risk management algo made similar assumption about CL.
You could of bought 1000 contracts with a small account if you had wanted to when the price was $1.

I don't know if anyone with a small account did buy 1000, but at least one trader with a small account said they bought over a 100 contracts and they lost a shed load when prices continued to go negative. That trader went public with his story around the time of the incident.

%%
Good points;
leverage risk warning + good = its a good idea for the broker protection + stockholders protection.
I w as reading a business book ''Harder I work.....'' Joe Ricketts , when he was building AMTD + 1987 crash\ some of the[stocks] margin accounts they sold were above selling price shortly afterwards, , fast rebound move then .
And some1987 crash accounts \they sent FEDX margin call warnings , but never had to be liquidated, because of the fast rebound [Those must have been better, best customers or those maybe $1 around margin sell area??] interesting...........

 

[Millionaire]

I'm trading the same instruments I've been trading for years NQ futures (of which the margin has increased dramatically over the years BTW). I've stopped blowing up accounts though, instead starting to withdraw money.

Did you increase the number of lots you trade?

If you became profitable vs losing, i would guess you must have.