Sorry IB, your customer service is a joke

IB is shooting itself in the foot by failing to publicize the following.

IB is making markets in EFPs, and allowing its customers to do so as well, thru its own internal ECN book devoted especially to EFPs. It is called IBEFP. IB usually maintains spreads on this ECN which are far narrower than the spreads one would have to pay by entering each leg of an EFP separately. Separately legging into an EFP would require one to pay the spread on an SSF, which would be very expensive. IBEFP replaces that mile-wide spread with a far narrower spread made by IB, and sometimes, narrowed even more by IB customers.

Conversions were previously superior to EFPs, for purposes of collecting interest or other financing needs, because of the smaller spread costs; but now, thanks to IBEFP, spreads are smaller for EFPs than for conversions. Commissions are also much smaller.

Another advantage of EFPs is that they eliminate the risk of early assignment created by the short call in a conversion. Early assignment can leave the remaining long put and long stock legs incompletely hedged and this can result in losses.
 
Quote from Shawn B.:

- I'm trying to sell some EFPs to gain interest on the first 10K, but when I try doing that the interface turns purple, a window saying "Logging in.." pops up, and nothing happens, the order does not appear anywhere
More...
An easier way to solve this: IB pay interest on the first 10k in an account. I've been using IB for just over 5 years now and I'm still hoping they will start paying interest. However I will not complain as I save a ton of money on commissions more than if I switched to another broker.

Also, I've had 2 problems with their technology (both minor) and they helped me clear them up both times.
 
Quote from atticus:

No, the dividend doesn't matter as it's reflected in a premium/discount on the put/call. IOW, it's priced as a discount on the synthetic to the forward. Synthetic = forward if [div = 0]. Spot + carry[fwd] - divie = synthetic. The discount is recovered by owning the spot. If you were correct, you'd receive a [nearly] risk-free arb on the dividend.

The only risk to the position is pinning; a dividend surprise; and/or a material change in the risk-free rate.
More...


Spot: $47.54 close
Forward based on 5-months at 5.38% 6mo LIBOR; $48.61; premium, $1.07
Dec 48C: 2.77
Dec 48P: 2.16
C/P: .61
Strike/spot: .46
Conversion capture: $1.07

Voila. 5.38%


I understand the dividend is priced in the options. So the question is should the net return be

-$47.54 (Paying for the stock) +$2.77 (selling the call) -$2.16 (buying the put) + Net difference between strike and price bought +$X of dividend?

When the board give you a dividend in Sep or Oct and you banked it. No one will take away your dividend when the options expired, will it?
 
Quote from Shawn B.:

Doing that with a conversion would be nice, in theory, the problem is putting it into practice

I.e. choosing different strike prices for the synthetic greatly affects the whole trade
For example if you try using a 70 strike price synthetic on QQQ you would only get like 30$ of interest in a year on 10000$, but choosing a different strike yields much different results

This effectively makes it necessary to have some sort of scanning tool to scan all the possible conversion combinations, much like the EFP market scanner, cause you risk locking in rates of interest as low as 0.1% from what I've seen

Does anybody know of a way to scan all those combinations and pick the best implied interest?
More...
obviously you are the joke because you don't know what you are doing.

You should forget about trading, forget about starting threads with titles like "Sorry IB, your customer service is a joke", and start going through the webinars here:
http://www.interactivebrokers.com/en/general/education/webinars.php?ib_entity=llc
 
Quote from rallymode:

Bro, we will talk it over in chat but i am nearly certain the yield isnt inferior.

Last i checked GOOG convs carried 50bps in edge at 5% yield.(IB mid market). I sold a bunch of DNA EFPs at 5.8% yield the other day at the bid too.

I agree on the roll savings though. EFP yield goes down as you go out in time but at 50 cents per lot it costs a little over nothing to roll it. Haircut is like less than 1% under PM so not really an issue. I am all for it if i can find a good yield on convs, i remember last year GOOG had 6 to 7% yield on some back month convs. But it seems every time i look at these i cant find anything better than 4-5% range on any of the liquid high fliers.
More...

check out AAPL 120 , OCT , I think its around 6%
 
Quote from Nasdaq5048:

Spot: $47.54 close
Forward based on 5-months at 5.38% 6mo LIBOR; $48.61; premium, $1.07
Dec 48C: 2.77
Dec 48P: 2.16
C/P: .61
Strike/spot: .46
Conversion capture: $1.07

Voila. 5.38%


I understand the dividend is priced in the options. So the question is should the net return be

-$47.54 (Paying for the stock) +$2.77 (selling the call) -$2.16 (buying the put) + Net difference between strike and price bought +$X of dividend?

When the board give you a dividend in Sep or Oct and you banked it. No one will take away your dividend when the options expired, will it?
More...

The dividend discounts the forward price at expiration, effectively reducing the yield on the conversion. This discounted-yield is recovered by the long spot dividend capture. Suppose a dime in dividends through expiration -- you're selling the synthetic a dime under the fairval based upon the LIBOR rate. This dime is recovered through dividend payments, as you're a shareholder. Zero-sum transaction.
 
Again, for the sake of honesty, I'd like to point out that I've been getting help from an IB representative via PM and he could reproduce the bug on his computer

You can try reproducing it too:

-Open a market scanner page, and go to US EFP
- Change the price to "raw price" (not interest %)
- Highlight an EFP
- Click "Order" in the upper left corner and submit the order
- I use version 873.3 (the latest)

You will see the market scanner grid turn purple, everything freezes for a second and then a window saying "Logging in.." pops up
You might also get strange commissions (x3 or x4 in my case)

Apparently, adding the EFP manually to another page solves the bug and you can submit the order with the correct commissions
 
You must log in or register to reply here.
Back
Top