Profitable, need help expanding

S

Sam Sanders

Long-time lurker, first thread. I'm a web/mobile programmer who has spent the last 5 years writing and tweaking an automated trading system. It was profitable but rocky from the start; however, this year I've spent a lot of time on it and it's paid off. I'm up 123% for the year with a max DD of 11.9%, sharpe of 3.77 (see chart).

My problem is margin issues. In mid-2014 I added more systems/patterns to trade, and I am running out of liquidity. I'm using IB's Portfolio Margin with about $200k in my account. Recently IB has auto-liquidated several positions and cost me money. A typical day would have me $125k long and $125k short in US equities (no OTC), unrelated (not pairs). About half that size would be held overnight. I know IB has a special margin stock list at https://www.interactivebrokers.com/en/?f=margin&p=stk2 and I do trade some of those.

However it seems I should be able to trade that size without IB auto-exiting positions for me if I'm down 1% on the day. I have seen people here talking about prop firms and I've done a search for the best ones (it seems Bright and EchoTrade are respected), but I'm a bit fuzzy on what they actually entail.

I need: Better margin, commissions <= IB's 0.005/share, and an API to submit trades
I do not need: Office, desk, data, charts, hand-holding, training, seminars, etc.

I've been through this site but can't find someone in a similar situation. I read all of lescor's http://www.elitetrader.com/et/index.php?threads/grinding-it-out-day-after-day.187730/ and some of our tactics do overlap.

Any thoughts/links would be appreciated!
 

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That is strange that you should be auto-liquidated in such a situation. If I were you, I'd dig into that further and figure out exactly what happened there, and then code in limits so you can avoid it. Surely IB must be able to give you some reason -- maybe you had more non-marginable securities than you thought? Also, short positions often get called in for reasons that have nothing to do with margin (e.g., lack of shares to borrow).

As far as other brokers are concerned, you can probably figure out yourself using google who has portfolio margin and what their balance minima are -- it is a moving target. I just found this using Google; it seems to list quite a few of the brokers that offer PM for sub-$1m accounts:

http://www.themargininvestor.com/brokers-offering-portfolio-margin.html

If you are trading large volume, you can generally get vastly discounted pricing from certain places that cater to that type of business, but many such places have larger minima. If you're interested in pursuing that, you might consider getting on the phone and calling a few places, or searching these forums.
 
Sam Sanders said:
My problem is margin issues. In mid-2014 I added more systems/patterns to trade, and I am running out of liquidity. I'm using IB's Portfolio Margin with about $200k in my account.
More...

Have you checked out share CFDs IB offers? They have more favorable margin requirements: http://ibkb.interactivebrokers.com/node/1912
As an alternative you can consider shorter holding time of your positions, as there will be less overlap, they will require less margin.
 
Thank you all for your responses. occam I'm assuming that I have more non-marginable securities that I would've thought but I confess I haven't delved into it too much. I only trade listed stocks with >50k avg volume so I didn't originally think it would be an issue, but it appears that was naive.

boba I am not familiar with CFDs but I appreciate the link. I see that it says "Generally lower commission and margin rates than shares" but I'm not sure I understand why that is, if it is essentially a synthetic replication of the stock? Re: holding time, many of my strategies involve entry/exit at the beginning and end of the day. I've done a small amount of testing on intraday strategies but have not put them into practice yet.

cmoss the goal is to not need one!
 
Sam Sanders said:
boba I am not familiar with CFDs but I appreciate the link. I see that it says "Generally lower commission and margin rates than shares" but I'm not sure I understand why that is, if it is essentially a synthetic replication of the stock?
More...
When you select a company ticker in the TWS window, you can see instruments for that company, CFDs are among them (you need access to the CFD trading arranged in the account management). Then you can buy and sell CFDs instead of the real stock of the company.
The way it all done underneath is described on the IB website. They call it the DMA model.
http://ibkb.interactivebrokers.com/article/1783
Margin is usually 10% intraday. Can vary though per issue.
 
Last edited:
Sam Sanders said:
Long-time lurker, first thread. I'm a web/mobile programmer who has spent the last 5 years writing and tweaking an automated trading system. It was profitable but rocky from the start; however, this year I've spent a lot of time on it and it's paid off. I'm up 123% for the year with a max DD of 11.9%, sharpe of 3.77 (see chart).

My problem is margin issues. In mid-2014 I added more systems/patterns to trade, and I am running out of liquidity. I'm using IB's Portfolio Margin with about $200k in my account. Recently IB has auto-liquidated several positions and cost me money. A typical day would have me $125k long and $125k short in US equities (no OTC), unrelated (not pairs). About half that size would be held overnight. I know IB has a special margin stock list at https://www.interactivebrokers.com/en/?f=margin&p=stk2 and I do trade some of those.

However it seems I should be able to trade that size without IB auto-exiting positions for me if I'm down 1% on the day. I have seen people here talking about prop firms and I've done a search for the best ones (it seems Bright and EchoTrade are respected), but I'm a bit fuzzy on what they actually entail.

I need: Better margin, commissions <= IB's 0.005/share, and an API to submit trades
I do not need: Office, desk, data, charts, hand-holding, training, seminars, etc.

I've been through this site but can't find someone in a similar situation. I read all of lescor's http://www.elitetrader.com/et/index.php?threads/grinding-it-out-day-after-day.187730/ and some of our tactics do overlap.

Any thoughts/links would be appreciated!
More...
%%

Congrats on the %%, i can think of several situations where even if you were down only 1%, some of your
positions should be liquidated.It sounds like they did not liquidate all your longs or all your shorts
so i would ask younext broker about those stocks you were liquidated on, especially since IB doesnt have alogical reason to unwise liquidate positions.
Not saying you should trade silver, but exchange had a good reason to raise margins many times or liquidate.
 
Why not set up a private fund from friends and family? If you keep it to a limited number of investors, you can avoid the full registration process with the SEC. You can then also charge a management fee and incentive fee, and make some more money from the operation. This is how many hedge funds start.
 
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