Negative cash balance limit

A

arcane73

Good morning,

I have been a customer of IB for more than 4 years but I still have areas that I do not master.

I sold a put on ETF Spy which is in the money.

I was exercised and had to buy 100 shares at 508. That's $50,800 debited from my account.

Everyone knows that you have to pay attention to your margin at IB. In my case, this does not change the margin because having sold a put is equivalent to being long on 100 shares.

However, my cash went negative. I may have to pay interest.

In any case, I sell my shares when the US market opens. So my cash account comes back positive very quickly.

Here is my question if anyone knows the subject.

Is there a limit to a negative cash account?

Can you have an account of $100,000 for example and a negative cash account of $500,000?

Otherwise, IB may automatically sell the shares at the opening as I will do anyway. But the count remains negative overnight.
 
You should be precise as you say margin and then say also cash account.
Is your acct a margin acct or a cash acct?
If it's a cash account and is now negative, then surely IB did something wrong... :)

FYI:
The collateral requirement in a margin account is called "margin requirement".
The collateral requirement in a cash account is called "cash requirement".

A cash account can never be, nor get or become, negative... :)

And: you was not exercised, but you was assigned (to be more correct: early-assigned).
The other side uses its right to exercise (meaning you will be assigned),
you as a short seller cannot exercise, you can only do an early-closing by buying back the option.

Or maybe the following happened:
Can it be true that you have a margin account, and
wrongly did a "Buy to Open" of the option, instead of the intended "Sell to Open"?
And then somehow also did an exercise? :-)
I admit, far-fetched, as that many errors one normally cannot do :-)
 
Last edited:
I studied your other postings, and it seems this happens:
Your strategy is to ShortSell DITM Puts with high delta (ie. high IV due to VolaSmile),
but since it's ITM you somehow immediately get assigned.
The strategy is good, but the assignment of course is unwanted.
Maybe try it with other titles, especially stocks.
 
arcane73 said:
Good morning,

I have been a customer of IB for more than 4 years but I still have areas that I do not master.

I sold a put on ETF Spy which is in the money.

I was exercised and had to buy 100 shares at 508. That's $50,800 debited from my account.

Everyone knows that you have to pay attention to your margin at IB. In my case, this does not change the margin because having sold a put is equivalent to being long on 100 shares.

However, my cash went negative. I may have to pay interest.

In any case, I sell my shares when the US market opens. So my cash account comes back positive very quickly.

Here is my question if anyone knows the subject.

Is there a limit to a negative cash account?

Can you have an account of $100,000 for example and a negative cash account of $500,000?

Otherwise, IB may automatically sell the shares at the opening as I will do anyway. But the count remains negative overnight.
More...

all brokers have limits on borrowing capacity and on balance sheet (gross capital usage). With the exception of some arb trades you will likely hit risk limits before you hit these limits.
 
The solution is to use options with European exercise style, ie. SPX or XSP etc. instead of the SPY.
B/c then an early-exercise/early-assignment is not possible...
It seems the guy gets ripped off by some hyenas @ IB :)
 
arcane73 said:
Good morning,

I have been a customer of IB for more than 4 years but I still have areas that I do not master.

I sold a put on ETF Spy which is in the money.

I was exercised and had to buy 100 shares at 508. That's $50,800 debited from my account.

Everyone knows that you have to pay attention to your margin at IB. In my case, this does not change the margin because having sold a put is equivalent to being long on 100 shares.

However, my cash went negative. I may have to pay interest.

In any case, I sell my shares when the US market opens. So my cash account comes back positive very quickly.

Here is my question if anyone knows the subject.

Is there a limit to a negative cash account?

Can you have an account of $100,000 for example and a negative cash account of $500,000?

Otherwise, IB may automatically sell the shares at the opening as I will do anyway. But the count remains negative overnight.
More...

yes you can have 50% in negative. normally you will have 4x leverage, i.e., 400k buying power if funded 100k cash. negative cash will be charged interests, that’s about it.
 
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