issue with E*TRADE, negative balance in cash account, could use an advice

[oopsie]

I was searching the www trying to figure out what to do. This forum seems perfectly capable of helping in my dilemma.

My $X,XXX Optionshouse account was transferred to E*TRADE. Several days after the transfer, I placed several trades selling SPX vertical spreads (both ways, puts and calls) that were expiring the next day. Notice, all the trades were of "limited risk - limited reward" kind. This was a purely volatility play and since my goal was to have a position close to direction-less, I was going to use all the funds in my account (that's not my only account, btw).

While I was making those trades my account info was completely out of whack. For instance, at one point it showed that I had $X,XXX,XXX available for trading. As it later turned out, they were crediting my account with the proceeds from the spreads sales without putting aside the money needed to cover those spreads as it is normally done. As the result, my exposure was larger than my account value - which is something I had not ask for and, I believe, something that E*TRADE shouldn't have allowed to happen.

After the settle I got a Cash call on my account stating that I owe $X,XXX.

My take on this that they misled me with the erroneous account info and allowed me to get into position that my account type should not have allowed where my exposure was bigger than it could be normally allowed and bigger than I ever wanted it to be.

So, what side is screwed here and what are my options now? (pun intended) Should I ask them to make the balance $0? Should I ask them to get back the amount I had at the beginning of that trading day? Should I ask FINRA for arbitration if they insist on paying them or should I just pay and forget?

 

[Ryan81]

Per the margin agreement, you are on the hook for it, and if you don't pay it, they'll likely send it to a collections company which will destroy your credit. If they want, they can also pursue judgments against you and can garnish any wages you have or put leins on your property.

Edit: Oh, I just saw that it is a cash account, so you probably didn't sign the margin agreement. I still think they'll probably go after you though.

 

[beerntrading]

It's a margin account, you need Level 3 to trade verticals (or index options) at ETrade, and they're only available in margin accounts.

But, unless you have a spread north of 25% of the underlying, your margin requirement with them is 100% of the spread. I think it's less for index options, but not so much that OP would have been losing outside that margin requirement in any recent market activity (certainly since the optionshouse buy).

What did their customer service say? I mean, they clearly screwed up in letting OP into the position that exposed him beyond the account. OP clearly screwed up in getting into the position that exposed him beyond the account.

I doubt arbitration will get you anywhere here--just in that they (apparently) extended you excess margin in error; but it was still OP's responsibility to trade responsibly.

If it were me, I'd be comparing my commissions paid this year vs. the loss. They might cover some of it as a courtesy to a customer they're making lots of money off of...

 

[murray t turtle]

I was searching the www trying to figure out what to do. This forum seems perfectly capable of helping in my dilemma.

My $X,XXX Optionshouse account was transferred to E*TRADE. Several days after the transfer, I placed several trades selling SPX vertical spreads (both ways, puts and calls) that were expiring the next day. Notice, all the trades were of "limited risk - limited reward" kind. This was a purely volatility play and since my goal was to have a position close to direction-less, I was going to use all the funds in my account (that's not my only account, btw).

While I was making those trades my account info was completely out of whack. For instance, at one point it showed that I had $X,XXX,XXX available for trading. As it later turned out, they were crediting my account with the proceeds from the spreads sales without putting aside the money needed to cover those spreads as it is normally done. As the result, my exposure was larger than my account value - which is something I had not ask for and, I believe, something that E*TRADE shouldn't have allowed to happen.

After the settle I got a Cash call on my account stating that I owe $X,XXX.

My take on this that they misled me with the erroneous account info and allowed me to get into position that my account type should not have allowed where my exposure was bigger than it could be normally allowed and bigger than I ever wanted it to be.

So, what side is screwed here and what are my options now? (pun intended) Should I ask them to make the balance $0? Should I ask them to get back the amount I had at the beginning of that trading day? Should I ask FINRA for arbitration if they insist on paying them or should I just pay and forget?

%%
Since its E Trade +$,$$$;i think its reasonable to for them to pay for some that. They may pay part of it + then ask you to leave , but i call that win win .E Trade is the kind of broker that gives a toll free number+ then charges[takes it out of account] for some calls;but they get plenty of ads for that=plenty of negative ads.

 

[beerntrading]

%%
Since its E Trade +$,$$$;i think its reasonable to for them to pay for some that. They may pay part of it + then ask you to leave , but i call that win win .E Trade is the kind of broker that gives a toll free number+ then charges[takes it out of account] for some calls;but they get plenty of ads for that=plenty of negative ads.

I've been nothing but happy with them--at least since they dropped prices. I've definitely looked into other brokers, but they've brought optionshouse pricing into their system now, so it's actually cheaper than IB for the number of contracts I trade. And the no commissions on dumping worthless contracts (with a .10 threshold) has been a game changer for me. Plus the litany of research you get access to.

Also, the only time I've been on hold with them was when they had 4 people trying to figure out my tax question.

 

[murray t turtle]

Per the margin agreement, you are on the hook for it, and if you don't pay it, they'll likely send it to a collections company which will destroy your credit. If they want, they can also pursue judgments against you and can garnish any wages you have or put leins on your property.

Edit: Oh, I just saw that it is a cash account, so you probably didn't sign the margin agreement. I still think they'll probably go after you though.

%%
I dont think it would destroy his credit ;
DISH network put on my credit report some monthly charges that were false. I moved , with proper notice, so i disputed false charges on my report. I also, since i dont like E Trade much;i would point out Interactive Brokers has or had an auto sell, so part of its on E Trade, for sure. NOT a prediction, but since its $,$$$, they will probably turn it to a law firm, which for me would be great i want a judge + courtroom to hear E Trade toll free number is not toll free + IB has a better risk management..........................................................................

Wells Fargo Bank[WFC] turned my account over to a law firm + i paid that asap- i owed that

 

[beerntrading]

E Trade toll free number is not toll free

Where are you getting this from? I've never come across an unexpected charge in my transactions. The one exception to that was me missing a decimal point in my trade log...oh, and the time I had the 4.95 in my log, but didn't get charged for it the first week they rolled out the no commission worthless options buy back before it was reflected in their published pricing.

And they don't actually advertise the number as toll free...just the international toll free.

I can't imagine you'd be doing broker assisted, but that's the only thing I can think...