PUT options liquidated at worst possible prices

S

somedudetrader

I had long June SPY 119 PUT options and short June SPY 114 PUT options today, and they were liquidated during the volatile trading period. They were liquidated at the time when SPY was trading at 110-111.

Simple math tells me that at the very very least, my 119 PUT options should be worth $8 - $9, since a put option gives me the right to sell SPY at 119, and given SPY being at 110-111 at the time, this option should at least be worth $8 - $9 (which should be much more, given the volatility and time value). I was liquidated at $5. My 114 short puts were liquidated at > $8.

First of all, my PUTs were evenly hedge, so every point lost by the 114 short PUT in the falling market is gained by the 119 long PUT. So why was I liquidated by Interactive Brokers?? Also, the prices were unreasonable as explained above, which caused me losses in the 5 figures. How should I get this compensated?
 
Someone else can help answer you on any rights you have, but I will say.. I was tryin to use the option market at that time and it was completely borked. I really wanted to sell a put vert. There was No market. I literally was seeing .01 vs 20000 as a bid ask spread in some options. I remember going through the spy too and saw what was happening during your trade. No market there either. It was better than what I described before, but very very wide. I think any market order got murdered. I couldn't get in. There were no specialists in there, none, they walked.
 
I had a lot of out of the money puts I was trying to get filled on and couldnt get them. I got a few in the xlf and spy, but left a lot more on the table. At least 30gs left on the table
 
I am thinking and I am just throwing an idea out there for you, that hopefully someone else can take further as they have more knowledge.

The crazy spreads I was seeing might have been making impossible outcomes for your Pnl seem real. So even though you had contained risk, but the market makers left up these ridiculous quotes, the computer at IB no longer recognized your risk as contained. And viewed these possibilities as real. Now if that is the case, the instrument you used Did Not work as promised and you should be entitled to your money back. Again I am just tossing out some ideas, I really hope someone with better knowledge helps you, and you get your money back.
 
Quote from somedudetrader:

I had long June SPY 119 PUT options and short June SPY 114 PUT options today, and they were liquidated during the volatile trading period. They were liquidated at the time when SPY was trading at 110-111.

Simple math tells me that at the very very least, my 119 PUT options should be worth $8 - $9, since a put option gives me the right to sell SPY at 119, and given SPY being at 110-111 at the time, this option should at least be worth $8 - $9 (which should be much more, given the volatility and time value). I was liquidated at $5. My 114 short puts were liquidated at > $8.

First of all, my PUTs were evenly hedge, so every point lost by the 114 short PUT in the falling market is gained by the 119 long PUT. So why was I liquidated by Interactive Brokers?? Also, the prices were unreasonable as explained above, which caused me losses in the 5 figures. How should I get this compensated?
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brokers all have exclusions from liability for glitches. chalk it up to education expense.
 
Quote from somedudetrader:

I had long June SPY 119 PUT options and short June SPY 114 PUT options today, and they were liquidated during the volatile trading period. They were liquidated at the time when SPY was trading at 110-111.

Simple math tells me that at the very very least, my 119 PUT options should be worth $8 - $9, since a put option gives me the right to sell SPY at 119, and given SPY being at 110-111 at the time, this option should at least be worth $8 - $9 (which should be much more, given the volatility and time value). I was liquidated at $5. My 114 short puts were liquidated at > $8.

First of all, my PUTs were evenly hedge, so every point lost by the 114 short PUT in the falling market is gained by the 119 long PUT. So why was I liquidated by Interactive Brokers?? Also, the prices were unreasonable as explained above, which caused me losses in the 5 figures. How should I get this compensated?
More...

IB is complete shit when it comes to margin/liquidation. It uses a fully automated engine.

Only thing you can do is always make sure there is enough cash in your account so it never get triggered.

I remember when i first started trading using IB, i had a fully balanced es mini option trade open with enough cash to cover. Then at night after the us market was CLOSED, the fucking thing started to auto liquidate my legs randomly using MARKET orders when the bid/ask spread for those option on futures were around 20-30pts WIDE!!!

Of course as soon as it sold off just 1 contract, my entire position became unbalanced on top of instant loss of 20-30pts, this triggered a point of no return causing further liquidations, and i could not open new trades to manually rebalance due to negative cash requirements my account now has.

So i literally just sat there...in the middle of the night, watching my position taken apart leg by leg at market order with a 20-30pt loss due to the spread on each trade, until there is nothing left. Call to customer service was of course another shitshow, one cs finally understood what is happening to my account, but he wont connect me directly to the trading desk. So it's me telling him to tell some trader in one of their asia's desk (was at night). Nothing ever got done.

I will never forget that night.

Luckily i just started using IB so didnt transfer too much money over and just chalked up to a lesson learned. After that i never let my excess drop below 30k (for a 100k account). Came from optionsxpress which is all human managed, it was quite a shock.

That been said, IB is great as a trading platform, just dont get fucked by their liquidation engine (which runs in after hours too).

ps: i would be fine in the morning if they didnt liquidate my positions during the night. But i was glad i learned this lesson earlier on.

/rant off
 
I have a complex book and basically everything on the data feed went nuts and consequently I was just relying on my long OTM puts to save the day. Goes to show you that when things heat up you can't expect the market door to always be open to trade with.
 
Quote from somedudetrader:

I had long June SPY 119 PUT options and short June SPY 114 PUT options today, and they were liquidated during the volatile trading period. They were liquidated at the time when SPY was trading at 110-111.

Simple math tells me that at the very very least, my 119 PUT options should be worth $8 - $9, since a put option gives me the right to sell SPY at 119, and given SPY being at 110-111 at the time, this option should at least be worth $8 - $9 (which should be much more, given the volatility and time value). I was liquidated at $5. My 114 short puts were liquidated at > $8.

First of all, my PUTs were evenly hedge, so every point lost by the 114 short PUT in the falling market is gained by the 119 long PUT. So why was I liquidated by Interactive Brokers?? Also, the prices were unreasonable as explained above, which caused me losses in the 5 figures. How should I get this compensated?
More...

You are perfectly hedged in a vertical spreads, there is no way you could lose more than you already paid for the options. You have every right to get IB to restore your options to you and cancel all their crazy cancellations.

Please do post any outcome you have with your dealings with IB in getting this issue settled. I do similar spreads with IB and I like to know if they take care of what is very clearly their mistake.

Good luck to you.
 
I think they wil say it was a fast market and you got whatever you got. I think it is a bunch of non sense because the market makers or whoever was on the opposite side made off like bandits. IMO.
 
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