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InteractiveBrokers "hyper-hypothecates" $14.5b of Customer Funds?
- Thread starter Chicago_CTA
- Start date
I've been reading this thread for a few days and have gleaned a few things from it.
1. stocks are always the last to know.
2. The vast majority of home gamers are fools.
3 If they knew where they stood in the food chain they would just give up and go home.
4. They don't 'till they are broke.
5. They never figure out what went wrong.
6. Home gamers aren't the only fools.
7. If you haven't figured out who the fool is in the poker game then it's you.
It's been fun pick'en you off!
http://www.thehedgefundjournal.com/magazine/200811/commentary/prime-broker-insolvency-risk.php
1. stocks are always the last to know.
2. The vast majority of home gamers are fools.
3 If they knew where they stood in the food chain they would just give up and go home.
4. They don't 'till they are broke.
5. They never figure out what went wrong.
6. Home gamers aren't the only fools.
7. If you haven't figured out who the fool is in the poker game then it's you.
It's been fun pick'en you off!
http://www.thehedgefundjournal.com/magazine/200811/commentary/prime-broker-insolvency-risk.php
Quote from NPTrader:
Most of the references to being able to rehypothecate funds indicate that you need to carry a margin loan through futures or shorting equities.
What's the implication for option writers who always maintain a positive cash balance, but carry contract obligations?
This is a good question.
If you write options and have in your account $100 in cash and some short positions that require $50 in collateral to hold, then can the $100 (or any amount of it) be re-hypothecated?
Quote from Options12:
This is a good question.
If you write options and have in your account $100 in cash and some short positions that require $50 in collateral to hold, then can the $100 (or any amount of it) be re-hypothecated?
I do not know, but one futures broker told me that many futures firms do not want accounts of customers who are option sellers, because, he said, they "tie up the broker's capital."
I was puzzled as to why that would be the case, but maybe whatever the real reason is offers a clue also as to the answer to your question.
Quote from comintel:
I do not know, but one futures broker told me that many futures firms do not want accounts of customers who are option sellers, because, he said, they "tie up the broker's capital."
I was puzzled as to why that would be the case, but maybe whatever the real reason is offers a clue also as to the answer to your question.
Thanks for sharing that.
Maybe without a margin loan there's no way to leverage the customer account. The cash and short positions are just a liability.
Quote from Options12:
Thanks for sharing that.
Maybe without a margin loan there's no way to leverage the customer account. The cash and short positions are just a liability.
just a guess but it's prob b/c the brokers are very aware of traders who sold options then blew up not only themselves but wiped out the firms equity b/c they sold spx puts for $0.10 that were later worth $10.00 with no way to pay for them.
Quote from FrankSlaughtery:
just a guess but it's prob b/c the brokers are very aware of traders who sold options then blew up not only themselves but wiped out the firms equity b/c they sold spx puts for $0.10 that were later worth $10.00 with no way to pay for them.
Yeah but brokers are more sophisticated now.
They'd be inclined to quickly hate the game and not the player, in this case, by adjusting customer margin requirements to make sure that the customer first or simultaneously puts on an off-setting trade or maintains a cash surplus that would justify allowing a customer to sell risk that might imperil the broker or other customers.
FrankSlaughtery, to put it even more plainly:
"So it's not gambling. It's just the opposite."
--Cattle Rancher who lost a hedge in the MF Global crash.
From:
http://www.npr.org/2011/12/14/143727507/rancher-discusses-losing-money-with-mf-global
"So it's not gambling. It's just the opposite."
--Cattle Rancher who lost a hedge in the MF Global crash.
From:
http://www.npr.org/2011/12/14/143727507/rancher-discusses-losing-money-with-mf-global
The way I see it is that the biggest risk for rehypothecation is a liquidity crunch caused by longer term traders pulling their stocks and equity. Since we all know IB boasts about it's high number of trades per customer, and this makes sense since they are low cost and good for daytrading, they don't even have a very large numbers of longer-term type of trader as their customer. So, even if they wanted to, they can't really rehypothecate that much because most of the traders don't hold over night. This assertion, in my view, also makes IB less risky when rehypothecation is concerned.
Quote from Options12:
FrankSlaughtery, to put it even more plainly:
"So it's not gambling. It's just the opposite."
--Cattle Rancher who lost a hedge in the MF Global crash.
From:
http://www.npr.org/2011/12/14/143727507/rancher-discusses-losing-money-with-mf-global
yeah that sucks for him but it sucks just as much for someone else who lost the same amount that was an individual trader. money's money. this is like buying homeowner's insurance and finding out the premiums you paid vanished and the co. doesn't exist anymore. as has been said many times before, the only solution to this is to go w/ a broker that doesn't do prop trading and/or is tbtf so the feds bail them out.