Margin debt negotiations
- Thread starter FortNox
- Start date
I don't think any broker or bank has "official policy" on repaying negative balances - it would be on a case-by-case basis. You would have to talk to them.
I'm still interested to know what option position caused the negative balance, how else can someone else avoid the same situation if they don't know what happened? You do not want to share that info for some reason.
I use IB as second backup broker for various reasons, cheap commissions is seldom ever cheap as they have gotten so enormous through the years, they have no wiggle room like a smaller broker does wanting to keep you as a customer, IB doesn't care whether you there or not. The answer is simple, liquate holdings and make them happy, they have enough legal to make you know you did wrong. Should have lighten the load Friday before or taken insurance to offset risk, but you rolled the dice? You already knew about IB beforehand, so you really have no complaints. Am sure if they owed you, would you agree to payment plan?
Otm . If you want to know my positions private message me. I was trying to get information from people who have already gone through this situation. Not discuss trading details of my demise. Apparently, people are most interested in how I lost money and not how to handle it. So if I start posting my detail this is going to go off topic. But I would be happy to discuss privately.
Details of the trade are both educational to everyone on ET and will determine the responses on how to handle it. Take this thread as an example: Margin Call on an IB IRA account (Need Suggestions)
Lesson learned: Be aware of expiring OTM long options. I always thought being long calls "gives you the right but not the obligation" to buy the stock, but developer17 found out the hard way that isn't the case and he shared the details with ET.
- In your case was it short options? If so then you should be responsible for the debit.
- Was it a credit or debit spread with a defined maximum within your accounts limit - but the short legs volatility went way out of whack and the position was closed automatically at a loss much higher than the theoretical maximum loss? If so then the broker should be responsible.
- Without the details of the trade one can only speculate who is at fault for the debit you incurred.
OP - I gave advice before but I think now it's too late. Your only chance would be to privately contact someone high up through your network. Then explain your problem and see if you could get a resolution. Somehow you've gotten ahold of their general council who I imagine is going to hold a hard line. If this were resolved in your favor they'd want to make sure of your discretion in broadcasting the decision.
What I never understood about IB is how they get away with this auto liquidation on internal margin violations. I really don't get how this can square with their fiduciary responsibility when they liquidate clients accounts into this and volatile markets. No broker I use would ever dare trade in a client account without going through the process of contacting them and verifying their intentions.
What IB did to me long ago was jack up the margin on an illiquid product overnight by a factor of 10. Then they liquidated my account right into the waiting Timber Hill orders. Cost me 100k. The market was dead still at the time. I was quite upset but knew then that I could not fight the machine.
What I never understood about IB is how they get away with this auto liquidation on internal margin violations. I really don't get how this can square with their fiduciary responsibility when they liquidate clients accounts into this and volatile markets. No broker I use would ever dare trade in a client account without going through the process of contacting them and verifying their intentions.
What IB did to me long ago was jack up the margin on an illiquid product overnight by a factor of 10. Then they liquidated my account right into the waiting Timber Hill orders. Cost me 100k. The market was dead still at the time. I was quite upset but knew then that I could not fight the machine.
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How did that cost you 100k? If the margin is increased on an open position (and you don't have the margin to cover it) would it not be closed at the current price? - Your unrealized gain/profit is now realized. No big deal.
I've said it before and I'll say it again...Timber Hill make me spew venom. The treatment they dished out to Larsen and Veiby was simply abhorent.