Margin Violation Warning

Z

ZEAK

Hi,

Looking for some help to understand margin for IB. I received a message that I am in violation. I don't understand why as I am long Calls on a stock, and also hold the stock in the account. I thought that when I bought the calls the funds were deducted from my account, and I can only loose what I paid for them?

When I inquired about it, received this reply, which further confused me.

I have reviewed your account and see the following.

1) You are long options. In a Reg T margin account, option value is deducted from your equity with loan value.

2) Your Excess Liquidity is the difference between your equity with loan value and you maintenance margin requirement. For your account this is equal to 56,261-53,404, or 2857.00.

3) We start sending warnings when your excess Liquidity is less than 5% of your total account value. Currently, this percentage is 2,857/61,748, or 4.6%.

Please let me know if you have further questions.

If long calls, why would the value be deducted from my equity with loan value?
Thanks for any info to help me better understand this.
 
I explained why. I have received a margin violation warning, thats why. I am not looking for downside protection.
 
ZEAK said:
I am not looking for downside protection.
More...
the brokerage firm is looking for downside protection(against losses in your account).
for margin purposes options are valued at zero in an ordinary margin account.
 
ZEAK said:
Hi,

Looking for some help to understand margin for IB. I received a message that I am in violation. I don't understand why as I am long Calls on a stock, and also hold the stock in the account. I thought that when I bought the calls the funds were deducted from my account, and I can only loose what I paid for them?

When I inquired about it, received this reply, which further confused me.

I have reviewed your account and see the following.

1) You are long options. In a Reg T margin account, option value is deducted from your equity with loan value.

2) Your Excess Liquidity is the difference between your equity with loan value and you maintenance margin requirement. For your account this is equal to 56,261-53,404, or 2857.00.

3) We start sending warnings when your excess Liquidity is less than 5% of your total account value. Currently, this percentage is 2,857/61,748, or 4.6%.

Please let me know if you have further questions.

If long calls, why would the value be deducted from my equity with loan value?
Thanks for any info to help me better understand this.
More...
Did you have cash to cover the full price of all the stock you bought and the full price of your call? If so, a margin call is bogus. If not, then you bought on margin. To determine how much margin you have you need to subtract what you paid for the call right off the top, it is just like money taken out of your account. Then calculate margin on what's left just like you normally would.
 
Why doesn't the OP post info on his whole account. This can be resolved in 3 posts:

1. Here is my question. Here are all the positions on my account and its equity balance. Why do I have a margin call.
2. This is why you have a margin call.
3. Thanks.
 
Been busy...

As of Thursday my account was:
Total Cash (-$1,032)
Stock $60,844
Options $4,137
Net Liquidation $63,930
Equity with loan value $59,793
Current initial margin $56,957
Current maint margin $56,957
Current available funds $2,856
Current excess funds $2,856
Buying power $9,521

I received a margin violation email again that day.

Thanks for any info on this.
 
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