Reg T VS Portfolio Margin

Robert Weinstein · Apr 20, 2008

I trade with IB and I am thinking of changing over to Portfolio Margin next week and would like to get some feedback on the pros and cons.

My thinking is that I can sell some EFPs and earn a little bit more interest on my money and with Portfolio Margin I will only required to tie up Less than 1% (I think based on the information on IB)of my funds for margin.

With Reg T it appears that I will tie up a lot more of my funds and have lower leverage.

I mostly day trade and almost never carry overnight a long position. I do once in a while carry over a short position overnight but I will not have to pay interest on that anyway.

From What I read on the IB website I will still only get about 3X intraday leverage on shorts but I have also read that the actual leverage could be less with portfolio than with Reg T so I am wondering if anyone has had some experience doing what I am thinking of doing.

Shreddog · Apr 20, 2008

Quote from 1Reason:

I trade with IB and I am thinking of changing over to Portfolio Margin next week and would like to get some feedback on the pros and cons.

My thinking is that I can sell some EFPs and earn a little bit more interest on my money and with Portfolio Margin I will only required to tie up Less than 1% (I think based on the information on IB)of my funds for margin.

With Reg T it appears that I will tie up a lot more of my funds and have lower leverage.

I mostly day trade and almost never carry overnight a long position. I do once in a while carry over a short position overnight but I will not have to pay interest on that anyway.

From What I read on the IB website I will still only get about 3X intraday leverage on shorts but I have also read that the actual leverage could be less with portfolio than with Reg T so I am wondering if anyone has had some experience doing what I am thinking of doing.

Try the "What If PM" button in your account window when you have some typcial positions on and see what effect it has.

trading1 · Apr 20, 2008

Generally, I find it hard to work out the effect of PM, though without doubt it seems to give far higher leverage, about 6:1. It's useful when holding both short and longs and unusual because seems to NOT want an equal proportion of shorts and longs, to make for optimal leverage

Robert Weinstein · Apr 21, 2008

Quote from Shreddog:

Try the "What If PM" button in your account window when you have some typcial positions on and see what effect it has.

Yes, I have done that a few times. I think it will be a net positive but wanted to get some feedback before i changed over. I would rather know in advance than to find out while in a trade.

Shreddog · Apr 21, 2008

Quote from 1Reason:

Yes, I have done that a few times. I think it will be a net positive but wanted to get some feedback before i changed over. I would rather know in advance than to find out while in a trade.

I generally seem to get about 5-6 to 1, but it really depends on what you have on and your ratio of long/short. You can always switch back if you don't like it.

Robert Weinstein · Apr 23, 2008

Quote from Shreddog:

I generally seem to get about 5-6 to 1, but it really depends on what you have on and your ratio of long/short. You can always switch back if you don't like it.

Hello Shreddog,

Thanks for the reply. Does that include both longs and shorts. For example I am Long a stock (only one without a short) and the margin is actually a lot less than Reg T.

As a result I have held back on switching.

thanks

Shreddog · Apr 23, 2008

Quote from 1Reason:

Hello Shreddog,

Thanks for the reply. Does that include both longs and shorts. For example I am Long a stock (only one without a short) and the margin is actually a lot less than Reg T.

As a result I have held back on switching.

thanks

I've not had a situation where my buying power is less than I would have had with Reg T. It's hard to be more specific than that. I'd say try and see. Not really that much risk IMO.

Robert Weinstein · Apr 26, 2008

Quote from Shreddog:

I've not had a situation where my buying power is less than I would have had with Reg T. It's hard to be more specific than that. I'd say try and see. Not really that much risk IMO.

Thanks Shreddog, I applied to have the change over on Friday. Hopefully it will be done Monday or Tuesday.

I have also noticed that the margin requirement appears to be lower with my current covered calls but excess liquidity is actually lower. Not sure yet what to make of that.