Interactive Brokers for day-trading Futures?

[MK020]

I've gathered from the forum that Interactive Brokers is not a preferred way to trade futures, but is it simply because of margins and commission, or is there something else like order execution that is bad?

Their high margin requirements aren't an issue for me. Their commissions do seem high at first glance, but given that they also pay interest on cash in the account, my back of envelope calculations say they'll actually be cheaper.

So I'm mainly checking to see if there's another reason that I should avoid IB for futures?

 

[Overnight]

... but given that they also pay interest on cash in the account, my back of envelope calculations say they'll actually be cheaper.

So I'm mainly checking to see if there's another reason that I should avoid IB for futures?

You don't earn interest with cash in a "futures account."

 

[Robert Morse]

Their high margin requirements aren't an issue for me. Their commissions do seem high at first glance, but given that they also pay interest on cash in the account, my back of envelope calculations say they'll actually be cheaper.

We do not pay interest on balances in a futures account but you can partially fund with a T-bill and do better.

 

[MK020]

what's a "futures account" in IB? I thought you can trade futures, stocks, options all from the same account?

 

[manonfire]

You don't earn interest with cash in a "futures account."

At ib you trade all products from one account and yes the pay interest. It used to be common to hold a percentage of your cash in 90 day tbills in your account with an fcm to earn a return on cash. Not worth it in most cases anymore.

You don't earn interest with cash in a "futures account."

 

[MK020]

We do not pay interest on balances in a futures account but you can partially fund with a T-bill and do better.

Interesting, can you expand a little or tell me where I can find more information? Quick google search did not yield any info.

 

[Robert Morse]

We introduce to Wedbush futures.

• 1 Year T-bill is just over 2%.
• It is marginable at 95%.
• You fund an account with $100,000
• You buy a 1 year T-bill which trades at a discount to parity. Wedbush charges $50 to buy the bill.
• The most I would fund an account with a T-Bill is 75%, but that is just IMO. If your account is very volatile, I would fund with less. Leave the balance as cash. ($75,000 T-bill, $25,000 CASH)
• Wedbush holds the T-bill at cost until it matures.
• You need to keep your Liquidating equity above your T-bill value or they will charge you to borrow vs T-bill.
• Your initial margin requirement must stay below the 95% of the T-bill value + CASH or you will get a margin call for the difference.

Does that help?

 

[Robert Morse]

what's a "futures account" in IB? I thought you can trade futures, stocks, options all from the same account?

Regardless of what they show you, all futures trading in the US must be done is a segregated future account as per NFA/CFTC rules. When you apply for a futures account at any broker that offers universal accounts, a futures segregated account is created.

In fact many FCMs create 3 for your futures account.
https://www.nfa.futures.org/rulebook/rules.aspx?RuleID=SECTION 4&Section=7

• Segregated account for US listed Futures
• Segregated account for foreign listed Futures
• Non-segregated account for deliveries.

Bob

 

[MK020]

We introduce to Wedbush futures.

• 1 Year T-bill is just over 2%.
• It is marginable at 95%.
• You fund an account with $100,000
• You buy a 1 year T-bill which trades at a discount to parity. Wedbush charges $50 to buy the bill.
• The most I would fund an account with a T-Bill is 75%, but that is just IMO. If your account is very volatile, I would fund with less. Leave the balance as cash. ($75,000 T-bill, $25,000 CASH)
• Wedbush holds the T-bill at cost until it matures.
• You need to keep your Liquidating equity above your T-bill value or they will charge you to borrow vs T-bill.
• Your initial margin requirement must stay below the 95% of the T-bill value + CASH or you will get a margin call for the difference.

Does that help?

Thanks, that's helpful and something to consider

 

[HobbyTrading]

At ib you trade all products from one account and yes the pay interest. It used to be common to hold a percentage of your cash in 90 day tbills in your account with an fcm to earn a return on cash. Not worth it in most cases anymore.

This is correct: IB does pay interest, but the amount depends on the currency and value of the cash. See here for an overview: https://www.interactivebrokers.com/en/index.php?f=1595
I use approximately 70% of the cash in my account to buy ETFs, instead of T-bills you suggest. But the purpose is the same: trying to get a bit higher return.