Margin help

misterkel

misterkel

I'm not getting something about margin. Here's a screen shot (many more positions similar):
upload_2021-1-14_18-24-57.png


The entire value of this position is $300 and that is the max possible loss should the stock go to ZERO. Why is my margin at 667 - twice the largest potential loss? Why does the position value calculate as if both positions are long?
USD position, account is in Canada, on IB.

thanks for any insight. I really shouldn't be looking at potential liquidations based on my positions, but that's the warning I got. Unlikely to happen, but still..
 
I'm going to hazard a guess here...

That's a penny stock. Less than $3.00 per share. You are long the stock, and you can't use margin to buy stocks that are that cheap. For this particular position, you have to put up 100% of the cost of the stock.

Your screenshot does not show your cost basis.

The requirement of 100% of the cost of the stock may be reduced by some portion of the premium you collected for the calls that you sold.

BMK
 
BMK said:
I'm going to hazard a guess here...

That's a penny stock. Less than $3.00 per share. You are long the stock, and you can't use margin to buy stocks that are that cheap. For this particular position, you have to put up 100% of the cost of the stock.

Your screenshot does not show your cost basis.

The requirement of 100% of the cost of the stock may be reduced by some portion of the premium you collected for the calls that you sold.

BMK
More...

That's what I calculated, but the position could never be more than $300 total, with a max loss of $300, if stock goes to zero. I can't figure why my margin is twice the max possible loss. In other words, the margin is 200% of the stock price. The IB support guy just said 'we're doing what the regulators tell us,' but he couldn't explain why it was this way.
What's also odd is that my calendars show zero margin! I don't know what I'm missing, but it makes no sense to me.
 
I've been complaining about option margin for years. Just accept that it makes no sense. :-)

Canada Margin for IB:

Cov.Calls.png
Stock.Margin.Canada.png
 
OptionsOptionsOptions said:
  • Options are non-marginable.
  • A Covered Call is long 100 shares, short 1 call contract with all brokers.
More...

So do you get dinged for margin on BOTH sides of the CC? That's f'ed, if so, because as the stock price rises, your margin rises twice as fast and you have no increase in liquidation value, but you do you have a more secure trade.
Is that how it works?
 
well, this seems to be my trading style, so I want to leave IB and find a broker who doesn't do this BS.
Can anyone recommend a broker with a margin structure that makes sense?
 
I haven't been on in awhile but just happened to stumble on this thread. I have had the same issues with this covered call margin. This can really cause problems when the stock crosses the strike price. Awhile back I was doing covered calls on Northern Dynasty (NAK on the amex) It also trades on Toronto but options are not available. The stock was let's say 0.95 and I had some 1.00 calls written against NAK. Say the options were 0.15 then my margin was 0.95 + 0.15 but i got 0.15 for the option so i'll need just 0.95 of my own money to margin this position. As long as NAK stays below 1.00 all is well. Now I have a lot of extra margin in my account and a decent position so I decide to go outside and pull some weeds from my small garden. I come back and NAK has crossed 1.00 and I am undermargined. As NAK continues to move higher my NLV increases but my margin deficit is rising. I have to liquidate some positions. IB has a really detailed margin report so I was able to print off the last few days and figure this stuff out. As the stock crossed the strike price they were adding the call price to the margin again. I am also from Canada so I can't say if it works like that in the US. At least we don't have that stupid PDT rule up here!
 
whowah said:
I haven't been on in awhile but just happened to stumble on this thread. I have had the same issues with this covered call margin. This can really cause problems when the stock crosses the strike price. Awhile back I was doing covered calls on Northern Dynasty (NAK on the amex) It also trades on Toronto but options are not available. The stock was let's say 0.95 and I had some 1.00 calls written against NAK. Say the options were 0.15 then my margin was 0.95 + 0.15 but i got 0.15 for the option so i'll need just 0.95 of my own money to margin this position. As long as NAK stays below 1.00 all is well. Now I have a lot of extra margin in my account and a decent position so I decide to go outside and pull some weeds from my small garden. I come back and NAK has crossed 1.00 and I am undermargined. As NAK continues to move higher my NLV increases but my margin deficit is rising. I have to liquidate some positions. IB has a really detailed margin report so I was able to print off the last few days and figure this stuff out. As the stock crossed the strike price they were adding the call price to the margin again. I am also from Canada so I can't say if it works like that in the US. At least we don't have that stupid PDT rule up here!
More...

PDT rule?
 
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