Making 40%/year selling SPX options, and huge SPX Margin/BP differences between TDA and IB

[guru]

Gentleman,, the missing piece of your puzzle is PORTFOLIO MARGIN,
i do not have standard reg t , if you do not know about pm,, heres a link for some explanation, https://en.wikipedia.org/wiki/Portfolio_margin ,, , further more, my 25 years at this game has led me to my approach which is specific, very far away strikes with very short DTE, i bascially provide a service to everyone who does credit spreads, i furnish good prices on the outer legs,, i started in 1994 with 38k doin OEX spreads ,,then it got real serious in 98 as a SOES bandit to 2002 and in 2006 the gates of heaven opened up, i got portfolio margin, GAME CHANGER.. in addition to my approach came weeklys around 2010,, i have taken 4 major hits since 1994 -- 1998,2010-2015 and 2018 18-30% of my portfolio , it just takes a few months to make it back and i still managed to Beat the S&P since 1998,,, as for the non option position of TVIX ,, since that COntango stock floated in 2009 i have shorted 100- 3000 shares a day every, it a depreciating asset just look at the 10 yr chart, it just keeps reverse splitting, again, major mkt drops this can get a lil hairy,, we keep at it,, look im not selling any thing, im not pitching anything,, and NO I did NOT LOSE MY MIND, and im NOT a ticking time bomb , im focused , i have refined my approach to fit my stocks and my comfort level, and that took time ,many years ,,im always learning like everyone else here , the differences with IB and TD is concentration risk,, yes 10 contracts may be less margin at IB,,but when you start to do size 1000 contracts TD risk profile are more favorable , the FUND im referring to is called FOSTER GLENWOOD and we have 3 accounts that make up the account , TD ,IB and ICBC,,,, we know what positions works best at each firm,,,you have to have a strong work ethic, and a really positive attitude and the smarts to be creative to find all the hidden high probability . positions, also,, working for a small firm margin .risk and trade desk, along with helping people im blessed to get to see thousands of clients accounts and how they make or lose money,, the ones who make money only trade 1 to 5 names, the rest who trade many names ,mostly lose money,, as for the and i dont think i ever ask for vaseline , im just addressing all the unknown chatter here,, when asked i DO explain in detail of any position i have, ,,i DONT bull shit, i dont play games I DONT advise ,,i TRADE and i help others ,if you wish to know more feel free to ask, i can be found on the options traders forum on Facebook,

Wow, we’ve got living legend on ET

Rick, thanks, I’ve seen several of your responses about portfolio margin and appreciate those, but I just can’t reconcile them with my own portfolio margin accounts, therefore trying to gather whatever info I can from other people.

I’ve looked at a few live and demo PM accounts at IB and TDA, and they not only seem to provide different base margin/bp (between IB and TDA) but also the bp/margin use varies based on our positions, differently at different brokers. Some brokers like TastyTrade totally screw up margin calculations, for example when legging-into spreads (Tasty wouldn’t recognize those as spreads) and admitted to bugs in margin calculation they’re yet to fix. TDA and IB are better at margin calculation and assessing total portfolio risk, but differ between each other, and possibly even between customers. You may see $x available margin and simply use it as you please, but there may be underlying margin calculation based on your existing positions, and possibly other factors (account size?).

Overall IB seems to give me better margin than TDA but still not enough to sell too many naked options. On another hand, someone on FB showed me their TDA account where selling some naked equity options used less buying power than at IB.

Those differences will continue bugging me because I can’t trade professionally without understanding all factors that contribute to and account for those differences. I’m even thinking about closing all my positions at IB and moving to TDA just to check whether a larger PM account size would matter, but that would be a lot of trouble. Thus for now I’m trying to find out if anyone with TDA account could explain why/when/how you guys may end up with better margin than at IB.

Though I’m also aware that you’re doing some financial engineering and sometimes buy a few 5-cent options to offset the sold ones.

My margin use varies wildly at IB from day to day, even without practical risk, and I’m just looking for ways to master it.

 

[ktm]

Someone get me a very large tub of popcorn.

 

[BlueWaterSailor]

@BlueWaterSailor Help!

How much money does it take, in your account, to be +$900K in profit? WTF!

A few hundred if you're lucky; a few mil (and cutting losses early enough) if you're not. Seriously, though? There's no meaningful answer possible. How much could you have made pyramiding WTI from 1998 to 2008?


(Caveat on asking me for help with options: much as I wish and strive to, I do not yet make my living from trading - so my opinions in this regard may not be worth the electrons they're written on. Didn't even stay at a Holiday Inn last night. Take all with a large grain of salt, or better yet, a mug of rum. Make mine a Gosling's, or at least a Barcelo Anejo.)

 

[guru]

the differences with IB and TD is concentration risk,, yes 10 contracts may be less margin at IB,,but when you start to do size 1000 contracts TD risk profile are more favorable

I’m just going to conclude that the answer to my original question lies in Rick’s response “the differences with IB and TD is concentration risk,, yes 10 contracts may be less margin at IB,,but when you start to do size 1000 contracts TD risk profile are more favorable”.

There must be more details that I’m not going to pursue at this time, especially as IB openly states that they utilize some proprietary functions in estimating risk, position concentration, and calculating margin, so there is no math function or programming code anywhere online for calculating margin that would match what IB shows. At least I’ve got used to assessing it. Dealing with TDA margin could also need a few months of getting used to, but for now I prefer IB for my trading style and API. And I’ve had discussions with TastyTrade about their margin calculation issues, so I know it’s not a matter of simply adding margin of each position, while calculating portfolio margin may be buggy for smaller brokers. And it even seems that somehow not every broker properly calculates or knows how to calculate portfolio margin. Unless this is done by clearing firms and somehow messed up there as well, or standardized for brokers using specific clearing firm?
Robinhood even had issues with cash accounts and supposedly got screwed on someone buying hundreds of box spreads and getting assigned short shares with high interest, on hard to borrow shares. I believe that Robinhood was responsible for related losses by allowing that in a cash account.

 

[Rick Langer]

@Rick Langer , thanks for explaining and offering to answer questions. So is above statement correct? If so, is it that you are so far DOTM that you are outside of shock values?

i try to stay well away from 3 deviation drops, all within a weeks time frame, and it depends on the stock as well,, these deviations can and do vary from week to week

 

[Rick Langer]

@BlueWaterSailor Help!

How much money does it take, in your account, to be +$900K in profit? WTF!

i trade three accounts the largest is 24mill,, 2.4 and 1.2

 

[Rick Langer]

I think it's the combination DOTM and DTE close to 0 that he is aiming for.



Thanks for the response. I would like to hear about how you compare yourself to optionsellers.com

optionsellers didnt learn their lesson twice before the last blow up,, heres a DUO of NG traders who fell asleep at the wheel, seriously, if you you have a short of NG and hedged with oil,, not a good play ,, in addition heres the skinny,, a 100 thousand ton Cargo ship deployed to Galveston to berth to take on 19 different NG companies product for the first time EVER export out of USA,, someone has to know why this ship is coming to port, it takes time to get that ship to galveston , like no body knew this was happening,,its not like BIIB blasting a FDA approval overnight,,(this is why i never mess with biotechs),, the optionsellers are not traders they are hot shot schmoozers with cooshy offices and flashy cars who take lunch every day, im an in the trenches hardcare trader, i never leave my desk, i dont take lunch, and i look for WOTM crumbs that nobody wants and i hang offers out there on strikes im comfy with on names im very familiar with so people can complete their spreads,, basically providing a service,, any other questions , please feel free to ask , R

 

[qlai]

i look for WOTM crumbs that nobody wants

Why MMs don't want them? Do they compete with you at all?

 

[guru]

BTW, here is how I need to spend $50 today to get $100K extra margin for couple more weeks at IB (due to having many SPX calendars, diagonals and ratio spreads below 2000 strike, with some legs expiring in a few weeks or months):

 

[Amahrix]

optionsellers didnt learn their lesson twice before the last blow up,, heres a DUO of NG traders who fell asleep at the wheel, seriously, if you you have a short of NG and hedged with oil,, not a good play ,, in addition heres the skinny,, a 100 thousand ton Cargo ship deployed to Galveston to berth to take on 19 different NG companies product for the first time EVER export out of USA,, someone has to know why this ship is coming to port, it takes time to get that ship to galveston , like no body knew this was happening,,its not like BIIB blasting a FDA approval overnight,,(this is why i never mess with biotechs),, the optionsellers are not traders they are hot shot schmoozers with cooshy offices and flashy cars who take lunch every day, im an in the trenches hardcare trader, i never leave my desk, i dont take lunch, and i look for WOTM crumbs that nobody wants and i hang offers out there on strikes im comfy with on names im very familiar with so people can complete their spreads,, basically providing a service,, any other questions , please feel free to ask , R

@Rick Langer

An annoying aspect of the Black Swan problem - in fact the central, and largely missed, point -- is that the odds of rare events are simply not computable. We know a lot less about hundred-year floods than five-year floods -- model error swells when it comes to small probabilities. The rarer the event, the less tractable, and the less we know about how frequent its occurrence - yet the rarer the event, the more confidence these "scientists" involved in predicting, modeling, and using PowerPoint in conferences with equations in multicolor background have become. - Nassim Taleb, Antifragile, Page 7