Portfolio Margin Broker Comparison

[MegaDeth]

I have read through many posts here and other places and still do not have a definite idea of the best broker for portfolio margin for options strategies. This thread will serve as the reference to those who'd like to open an account with portfolio margin.

I am posting a poll here for the three major brokers that offer portfolio margin for 100k-125k. Please explain your experience with your broker regarding portfolio margin. Since portfolio margin requires a high capital commitment, it is uncommon for individuals to have portfolio margin concurrently with more than one broker. So if you can, please provide details of your portfolio along with your experience. If not, just share your experience.

I have a portfolio margin account with IB and it is not pretty. I am allowed to make trades (naked short puts on broad based indices) with lot lower margin requirement, only to have the margin requirements almost double overnight without any underlying movement and drop in volatility. Its almost laughable and their customer support said that's how it is supposed to be. My portfolio is heavily concentrated so I must incur that penalty but don't know how much I will need to diversify. There customer service don't know either. Anyway, I am ready to change brokers.

 

[gkishot]

Naked puts on stocks or on futures?

 

[makloda]

Quote from MegaDeth:only to have the margin requirements almost double overnight without any underlying movement and drop in volatility. Its almost laughable

Why is that laughable? Markets/Stocks gap down overnight without any prior movement or change in volatility.

 

[MegaDeth]

Quote from makloda:

Why is that laughable? Markets/Stocks gap down overnight without any prior movement or change in volatility.

There were couple of times when the market gapped up, the volatility was down the previous day and on the day in question, and yet my margin requirement went up significantly (with just holding naked puts positions). Is that okay to be laughable?

 

[gkishot]

Quote from makloda:

Why is that laughable? Markets/Stocks gap down overnight without any prior movement or change in volatility.

Portfolio margin is based on the portfolio risk.
But it's hard to believe that margin requirements for options change overnight because they don't change overnight even for the reg T-margin accounts.

 

[MegaDeth]

Quote from gkishot:

Portfolio margin is based on the portfolio risk.
But it's hard to believe that margin requirements for options change overnight because they don't change overnight even for the reg T-margin accounts.

And that's my biggest complaint about IB Portfolio Margin. When making the trade, the margin requirement is low. I wake up next day to horror with the maintenance margin lot higher. Like I said, after a few times of this happening, I paid attention to the futures at market open and the volatility for the prior day. Even with the futures higher and the volatility lower, the margin requirement is high. I don't particularly mind the higher margin requirement (at least not yet), just hate the unpredictability.

Wonder if there is something like intraday and overnight margin even with portfolio margin? Does anyone know?

 

[gkishot]

Quote from MegaDeth:

And that's my biggest complaint about IB Portfolio Margin. When making the trade, the margin requirement is low. I wake up next day to horror with the maintenance margin lot higher. Like I said, after a few times of this happening, I paid attention to the futures at market open and the volatility for the prior day. Even with the futures higher and the volatility lower, the margin requirement is high. I don't particularly mind the higher margin requirement (at least not yet), just hate the unpredictability.

Wonder if there is something like intraday and overnight margin even with portfolio margin? Does anyone know?

There is no overnight and intraday margin with portfolio margin as there is no overnight and intraday margin with the regular t-margin. The portfolio margin is reported in the overnight margin report under account manager. The margin in the morning should match exactly the margin in this report. One more thing: futures are not included in portfolio margining and they have overnight and intraday margins.

 

[dagnyt]

Quote from MegaDeth:

Wonder if there is something like intraday and overnight margin even with portfolio margin? Does anyone know?

IB does a LOT of strange things.

In my opinion, they are just lazy and don't give a damn.

There algorithms are set up the way they want them, and it's too bad if we don't like it. Your situation sounds impossible, but I have seed the incredulous, so the impossible must also occur with IB

Here is merely one example:

Buy on 600 call
Sell 3 620/630 call spreads.
Unlimited profit potential, limited risk.
Trade allowed.

But, change the sale of 3 calls spreads to 4 call spreads, and it's no longer allowed. It still has limited risk and unlimited profit potential. But it's not allowed to be entered as a COMBO order.

Amazing.

Cheap commissions don't come with any guarantees of reasonableness on the part of customer service.

Mark

 

[MegaDeth]

Quote from dagnyt:

IB does a LOT of strange things.

In my opinion, they are just lazy and don't give a damn.

There algorithms are set up the way they want them, and it's too bad if we don't like it. Your situation sounds impossible, but I have seed the incredulous, so the impossible must also occur with IB

Here is merely one example:

Buy on 600 call
Sell 3 620/630 call spreads.
Unlimited profit potential, limited risk.
Trade allowed.

But, change the sale of 3 calls spreads to 4 call spreads, and it's no longer allowed. It still has limited risk and unlimited profit potential. But it's not allowed to be entered as a COMBO order.

Amazing.

Cheap commissions don't come with any guarantees of reasonableness on the part of customer service.

Mark

Mark,

Hmm, interesting example. Just goes to show the inefficiencies with even the most popular brokerages. Out of curiosity, would IB allow you to place two different but same orders of the same quantities?

Also, may I ask who you use as your brokerage firm and your experience with portfolio margin with them? I have read a lot of your posts and would love to get feedback from a professional who has documented evidence of trading options for years. I mean no offense to others who've replied to the post.

Thanks.

 

[hedgex]

I also saw my margin jumping up overnight without movement in the underlying. Their algorithm is hidden, and the rough guidelines are hazy and useless. It's unpredictable. It makes no sense. I studied the behavior through margin preview on orders. If I close a $20K short position, the margin doesn't change at all. But I f I buy to close a call, the margin drops twice the transaction amount. I have to make a lot more trades just to keep the margin down.

I really they can disclose their algo so we can see how crazy it is.