Margin Call on an IB IRA account (Need Suggestions)

It has been many many years since I had an options position in an equity, so can someone enlighten me as to when purchased call options (the right but not the obligation to exercise) where exercised for you?

The only options I trade now (and rarely at that) are over the counter and I have never had a long option position exercised lest it be my decision.

So for your enlightenment, thank you.

1in10
 
Quote from 1in10:

It has been many many years since I had an options position in an equity, so can someone enlighten me as to when purchased call options (the right but not the obligation to exercise) where exercised for you?

The only options I trade now (and rarely at that) are over the counter and I have never had a long option position exercised lest it be my decision.

So for your enlightenment, thank you.

1in10
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OCC has an automatic exericse threshold of $0.25 ITM, which means that all options that are more than $0.25 ITM at expiry will be exericsed automatically for long option holders.
 
IRA accounts are subject to additional rules and regulations. The IB may be obligated to prevent IRA account holders from executing orders contrary to the IRA regulations.

You might want to claim that your request for the options not to be extersized was not honored, and let the IB prove otherwise.
 
Quote from dis:

IRA accounts are subject to additional rules and regulations. The IB may be obligated to prevent IRA account holders from executing orders contrary to the IRA regulations.

You might want to claim that your request for the options not to be extersized was not honored, and let the IB prove otherwise.
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lol. not going to work. ib software has an audit trail. lets face it he owes them the money and will owe the irs a penalty.
 
Quote from GoldmanSax:

I don't really understand why anyone would think this is someone elses fault. Clearly the guy shouldn't have been trading options. Any real options trader would know to check all their positions after 4:15, out of habit from the heydays.
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I quite don't agree with you. I have read many books on options for several years and this is the first time I hear of something of this nature. I have been to seminars, you name it......

Rules are rules, but the rules here are obviously wrong. If the closing price at 4pm is not the real closing price in regards for the option then the exchanges should extend trading hours for options trading as well, or take the 4pm closing as final.

It would only be fair in my opinion.

Cheers !!
 
Quote from optionpro007:

I quite don't agree with you. I have read many books on options for several years and this is the first time I hear of something of this nature. I have been to seminars, you name it......

Rules are rules, but the rules here are obviously wrong. If the closing price at 4pm is not the real closing price in regards for the option then the exchanges should extend trading hours for options trading as well, or take the 4pm closing as final.

It would only be fair in my opinion.

Cheers !!
More...
i show the close as 280.30.
 
the last time i checked, options trading doesn't stop at 4pm. there was a time when equity options trading ended at 4:10 and i believe they have now shortened it to 4:02. granted things today are different because of extended trading hours for equities but that doesn't change the fact that the individual didn't know the rules. that is why all brokers require you to agree that u have received and understand the Risk & Characteristics of standardized options.
Apparently this guy didn't understand how they work. If auto-exercise was not put in place amateurs that are deep in the money and don't do anything with their positions would be stuck with nothing.

As for people saying this is a margin account, I don't believe so. Most brokers set this up as a cash acct and i believe its no different at IB.

http://www.interactivebrokers.com/en/trading/marginRequirements/stockIndexOptions.php?ib_entity=llc

Purchases of calls are allowed in cash accounts because the risk is limited and defined, but this guy made the mistake of not closing his position.

Someone also asked earlier if this wasn't an IRA but just a regular cash acct would they allow u to buy securities beyond what u can afford in your acct. Again, maybe I'm a dinosaur and all this electronic trading has changed things dramatically but back in the day, the answer was yes, you could. That is why they have settlement dates, so u have time to deliver additional funds to your broker. If this happened in a regular acct, the trade may not have been liquidated so quickly.
 
I hope developer17 provides an update on this situation.

It seems to me that the IRA account could not go negative. The loss on liquidation wipes out all cash and equity in the account and the account ceases to exist. The excess loss becomes a "separate" matter between developer and IB. If he makes the $9000 deposit, the account is still at zero, but the 9 grand cannot be considered as having any relevance for IRA purposes.

I've had two somewhat similar experiences in my own IRA caused by my own stupidity in placing orders when I thought I was within my regular account. The first time the trade was well beyond my combined cash and equity balance, so I was a bit surprised that there was nothing to "catch" it. I called the broker and they were able to transfer the purchase out of the IRA and into the reqular account. The second time I did this and realized my mistake, I was able to sell other positions within the account on the same day so that funds would be available by settlement. I was a bit concerned that with the buy order occurring first whether there would be any problems come settlement, but nothing came of it.

However, in neither case was anyone to blame but myself.
 
I doubt there is any penalty due. If I recall correctly, over-contributions into a traditional IRA account can be done, but any overage is deemed to be done with after-tax money. That is, he has to now make a $9K contribution to get the account back to 0, but this $9K is not deductible as an IRA contribution.

I, too, show a closing price of $280.30, in the money by $0.30. It would be cool if someone would find the official OCC policy for closing price determination and post it.

I'm surprised that someone with a handle like "optionpro007" would not know that expiration when a stock is close to the pin is one of the most difficult parts of option trading, and requires close attention, possibly hedging, contrary instructions, etc. This is why it's such a bad strategy to trade options that have this pin risk in a restricted account (i.e. one in which you cannot effectively hedge).
 
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