Portfolio Margin - actual Margin always higher than displayed Margin Requirements?

X

Xenophon

Greetings,

I have a problem with the Margin Requirements in my Portfolio Margin Account on IB (IB Ireland, as I live in Europe).
Problem: the indicated Margin Requirements differ always from the actual Margin which is slightly higher than the RegT Margin.


It's generally said that with Portfolio Margin you have about 6.67 times more buying power. In the account window in TWS the buying power is indeed exactely 6.67 times my cash amount. So far so good. I know of course that in reality it depends on the volatility of the stock.

But if I look at stocks with low volatility and high market cap and check the Margin Requirements in the preview window, it is generally 15-17%. But oddly enough this Margin Requirement (see small popup-Window, bottom right in the screenshot) is never applied in the actual traid. In the example screenshot the actual Maintenance Margin is more than 27%. I have checked this with numerous stocks. The figures displayed in the small popup-Window that appears when clicking on Margin Requirement is always much lower than the actual Margin, which almost always slightly exceeds the RegT-Maintenance Margin of 25%.

Does anyone have an idea what's going wrong here?
 

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"Check margin" is based on your portfolio, so it's calculated against your current positions. Or is your current portfolio empty?
 
Just a hint: I gave up margin account for a cash account b/c I had the feeling it's nothing but just a big BS fraud.... :)
Since then I've peace of mind... :)
Only thing not possible with a cash account is stock shorting, but for this one can use a Put option.
Other advantages: no margin calls and no PDT rule, ...
 
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I believe this is because they apply a "concentration charge". For CFD's the website of IB mentions the following:

Concentration Minimum
In cases where a portfolio consists of a small number of CFD positions or if the two largest positions have a dominant weight, a concentration charge is applied instead of the standard maintenance margin described above.

We stress the portfolio by applying a 30% adverse move on the two largest positions and a 5% adverse move on the remaining positions. The total loss is applied as the maintenance margin requirement if it is greater than the standard requirement.

The initial margin is the maintenance charge + 10%.​

But this applies to stock positions as well. Basically it means that the full buying power is only available if you have multiple positions. If you only have say two positions the buying power is only 3.3 (100 / 30%).
 
Might not be eligible for portfolio margin. Minimum equity is at least 100k if you're a US resident, not sure for EU accounts. You won't get a concentration charge on something like GOOGL until you're at 100% of equity.
 
At Lightspeed, for accounts under $5mm GOOGL would be 15% for day trading but the overnight house requirement would be 18% as we add 20% for overnight house rules. For risk purposes, we do monitor for highly concentrated portfolios. I'd be a happy to share that concentration matrix directly with anyone interested, just email me. Our PM requirements are higher than IB. We require $175,000 initially and maintenance of $150,000. We have other requirements for approval that I would be happy to share on the phone to see if I think you might qualify and be a good fit. We offer PMA to both domestic and foreign based traders. Lightspeed Trader, Sterling Trader Pro, EZE EMS (Realtick), and CBOE Silexx can all handle PMAs.
 
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d08 said:
"Check margin" is based on your portfolio, so it's calculated against your current positions. Or is your current portfolio empty?
More...
My Account stood initially with roughly 46k in $-Cash.
Then I added mere hedging Positions (EUR/USD) with negligible effect on net liquidity.For a short time i hold some speculative micro futures positions (Gold/WTI). All no effect an the phenomena with the high margin on stocks.
Neither had adding 4 stock Positions (1.5k to 2k).

Due to the high cash position I thought I should have been eligible for the minimal Margin Requirement.

Solution/answer to my question:
I checked the margin always with the preconfigured amount of 100 stocks or changed ist to an amount which resulted nonetheless in a relativley high position size.

Now I checked it with much smaller amounts/position sizes and the resulting calculated margin requirement was much closer to the value indicated in the small popup-Window (click on "margin requirements", see screenshot).
Indeed it is in some cases lower than that value and in some cases oddly enough even zero.
Maybe because the already existing (higher) margin is lowered by adding these stocks, so that no "net" change in overall margin results?

Anyway, it seems that the actual margin change caused by opening positions is calculated by an algorithm which is extremely flexible and results are sometimes a bit difficult to understand. And really low margins requires low position sizes relatively to the depot value.

The margin requirements indicated in the small popup Window seem to be any kind of average value or so. Likewise the "buying power" in the account window.

What strikes me is that even with an ETF on the S&P500 margin requirement rises quickely, when it's position size exceeds about 20% of portfolio value.
And so far I don't know how the calculated margins will look like, after opening more positions and dwindling cash reserves. So e.g. no idea where the average margin would lie when I'm 80% (highly diversified) invested with only 20% cash reserves.
 
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earth_imperator said:
Confirms my suspicion that MarginAcct is in reality a big fraud... :)
One needs to be a good mathematician to realize it.
More...

Firms lend money to clients and take risk. For this risk they get compensated. If you don't borrow, you don't get charged. Why would this be a scam? Especially for firms like IB which charge lower and transparent margin rates. Ditto for Morse above who is transparent on the rates at lightsped.

Reg T margin is a US concept. Risk based margin is done outside the US which is another calculation but it seems concentration risk impacts the rate and for all I know Ireland requires different calculations than the Swiss regulators vs the US etc. Search the internet, you might find a thing or two on risk based margin.
 
earth_imperator said:
Just a hint: I gave up margin account for a cash account b/c I had the feeling it's nothing but just a big BS fraud.... :)
Since then I've peace of mind... :)
Only thing not possible with a cash account is stock shorting, but for this one can use a Put option.
Other advantages: no margin calls and no PDT rule, ...
More...
Can you day trade?
 
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