This type of thing happened to me all the time when I traded SPX spreads with IB, it's one of the prime reasons I'm no longer with them. Obviously "the algorithm" has an error. However their customer service people are too stupid to grasp the maximum loss in a spread and are taught that "the algorithm" is never wrong and the customer is always wrong. So they won't ever even pass this on as an error to their programming team, no matter what you do. If you're doing a lot of SPX trading I'd highly recommend someone like TDAmeritrade who has a flat options pricing scheme without passing through the exchange fees. Because SPX exchange fees are so high, it's actually cheaper to trade through someone like them than IB. As an added bonus, they don't hire imbeciles to man their customer service, nor do they treat their customers like imbeciles.
Interactive Brokers Margin
- Thread starter Kim Klaiman
- Start date
I tried those configuration changes, it didn't help.
Their latest response:
It's like I'm psychic! IB is predictably irrational, they never fail to disappoint. I like how they even capitalize it, "the Algo" like it's some kind of god or something.
Kim, without doing all the math myself, is what they're saying that you had some credit spreads move against you and that when you try to open another position that might change that spread (whether correct or not) that you're subject to initial margin, not maintenance?
And if so, does duplicating the position in SPY work?
And if so, does duplicating the position in SPY work?
The credit spreads did not move against me. Those are 5 2330/2350 credit spreads. They are saying that by adding 1300 put, this put breaks one of the 2330/2350 spreads and now the algo thinks that I have 2350/1300 credit spread (so instead of 5 20 point spreads, I now have 4 20 points spreads and one 1050 point wide credit spread).
1) I'd get 'em on the horn, not via a ticket.
2) Reject out-of-hand any response which links the *purchase* of a far-OTM option with any increase in risk.
3) Reject out-of-hand any response which links the purchase of one far-OTM option into any sort of spread, WITHOUT FIRST RECOGNIZING THE LONG OPTION WHICH PRECEDES IT in order from the market.
And run that up the human chain until someone gets it.
Yeah, I've been with IB for 11-12 years now. Mostly A-Okay, but some issues. Once, had to have a 4-way, 4-city conversation about SP500 deltas that were creeping *towards* the market (by expiry), rather than away. Had to explain Black-Scholes-Merton, role of 'time', the whole works. Once the "Ah-Ha!" moment happened, a flood-gate was opened, and the issue joined another (unspoken!) issue, and was resolved over a single weekend. (It was a flagrant-but-somehow-overlooked symptom of a known issue -- the clean-up was an entirely new TWS release.)
Like the issue I mentioned, if IB doesn't solve this, it will bite them hard.
This sort of margin arithmetic should be additive. FWIW, I just ran the purchase of a 1300 SPX Apr19 put, and guess what?? Impact on margin?? $0.
"Imbaciles" is right.
2) Reject out-of-hand any response which links the *purchase* of a far-OTM option with any increase in risk.
3) Reject out-of-hand any response which links the purchase of one far-OTM option into any sort of spread, WITHOUT FIRST RECOGNIZING THE LONG OPTION WHICH PRECEDES IT in order from the market.
And run that up the human chain until someone gets it.
Yeah, I've been with IB for 11-12 years now. Mostly A-Okay, but some issues. Once, had to have a 4-way, 4-city conversation about SP500 deltas that were creeping *towards* the market (by expiry), rather than away. Had to explain Black-Scholes-Merton, role of 'time', the whole works. Once the "Ah-Ha!" moment happened, a flood-gate was opened, and the issue joined another (unspoken!) issue, and was resolved over a single weekend. (It was a flagrant-but-somehow-overlooked symptom of a known issue -- the clean-up was an entirely new TWS release.)
Like the issue I mentioned, if IB doesn't solve this, it will bite them hard.
This sort of margin arithmetic should be additive. FWIW, I just ran the purchase of a 1300 SPX Apr19 put, and guess what?? Impact on margin?? $0.
"Imbaciles" is right.
Yeah, in this case max loss appears defined.
I wonder if the algos are considering what ifs in case there is assignment if market moves against you?
How does it work when you sell spreads in accounts with enough equity to absorb the spread loss, but if assignment takes place, it could ramp up margin requirements past the equity level in the account?
For example, $5000 account guy can sell one 1350-1300 put spread on AMZN, risking $5K, but if he is assigned, CBOE first has to sell him $135K worth of stock, before he resells at a loss at $130K. But he only has $5K, which means the broker has to lend him $130K from $5K, even if momentarily? Not gonna happen. Technically that breaks margin requirements at assignment, because he doesn't have $135K.
Probably not what this is, because then they wouldn't let you start 5 SPX short spreads, since account doesn't have equity to hold 5 long SPX futures positions at assignment, but it still let the account make that credit spread.
Their margin calculations are screwy with futures and FOPs. For example, you can be long ES and require less margin than selling a naked put of ES, which essentially has similar risk profiles (actually less loss with options when OTM + premium collected). They penalize short options very heavily with the margin system.
I wonder if the algos are considering what ifs in case there is assignment if market moves against you?
How does it work when you sell spreads in accounts with enough equity to absorb the spread loss, but if assignment takes place, it could ramp up margin requirements past the equity level in the account?
For example, $5000 account guy can sell one 1350-1300 put spread on AMZN, risking $5K, but if he is assigned, CBOE first has to sell him $135K worth of stock, before he resells at a loss at $130K. But he only has $5K, which means the broker has to lend him $130K from $5K, even if momentarily? Not gonna happen. Technically that breaks margin requirements at assignment, because he doesn't have $135K.
Probably not what this is, because then they wouldn't let you start 5 SPX short spreads, since account doesn't have equity to hold 5 long SPX futures positions at assignment, but it still let the account make that credit spread.
Their margin calculations are screwy with futures and FOPs. For example, you can be long ES and require less margin than selling a naked put of ES, which essentially has similar risk profiles (actually less loss with options when OTM + premium collected). They penalize short options very heavily with the margin system.
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