Synthetic long uses more margin than just being long?

[beefcaketrade]

It seems synthetic positions with futures at IB uses more margin than being straight up long futures?

Say long call, short put same strike.

Seems to maybe stem from the fact it is naked shorting an option, which is heavily penalized with margin requirement.

Is a synthetic position so much worse than a normal underlying position? Theoretically same delta. I guess there may be liquidity risk. But is there any other logical reason why a synthetic long position is more dangerous (hence requiring more margin) than just a long position in futures?

For synthetic stock positions though, it seems to be similar margin requirement to just long underlying. E.g. with SPY.

 

[Lee-]

It is not strictly the same as you are exposed to vega risk and as such more risk should incur a higher margin requirement. There have been other threads lately regarding IB's margin policies, so perhaps they're being extra cautious. What sort of margin difference are you referring to here? Is it relatively small or massive? I would expect some difference due to the additional vega exposure.

 

[luisHK]

I just checked a synthetic long on stock which requires 75% margin, and the system showed only 1 third of that for the synthetic long. Not sure how IB calculates this.
Not sure either that really ends up as tws indicates on the order once it is executed.
I've seen large discrepencies lately btw, between the margin requirements indicated in a stock's details ( right click ticker - contract info - details) and the margin necessary in the margin report, specifically stocks listed as default margin requirements that end up @50 and 100%, than a stock listed @30% that ends up less margin intensive.
I use those published requirements to finalize stock selection, but with such a mess it is not very helpful.
As of Op's question, I can't answer, (a bit ) sorry about the disgression.

 

[FSU]

It is not strictly the same as you are exposed to vega risk and as such more risk should incur a higher margin requirement. I would expect some difference due to the additional vega exposure.

if you are long a call and short the same strike put, there should be no vega risk, this is the same as being long or short the underlying.

 

[Chubbly]

There have been a few threads the last few weeks on how badly IB calculates margin.

In this thread I showed they charge many more times than you could ever lose in a debit spread.

https://www.elitetrader.com/et/thre...-ib-margin-calculator-and-support-are.306919/

 

[sle]

if you are long a call and short the same strike put, there should be no vega risk, this is the same as being long or short the underlying.

There is a small amount of vega and gamma risk even in a combo since these are American options. Not important for this conversation, since you are long the call and thus long early exercise optionality.

 

[drcha]

It may be most efficient to just trade the synthetic, then cover your short side with another option that is way out of the money. It will cost you a few cents but will decrease your margin requirement and yes, it's safer. Go back and look at October 19, 1987 if you don't believe me.

I'm glad if IB is conservative. I need them to stay afloat--I have money in there!

 

[Sig]

It seems synthetic positions with futures at IB uses more margin than being straight up long futures?

Say long call, short put same strike.

Seems to maybe stem from the fact it is naked shorting an option, which is heavily penalized with margin requirement.

Is a synthetic position so much worse than a normal underlying position? Theoretically same delta. I guess there may be liquidity risk. But is there any other logical reason why a synthetic long position is more dangerous (hence requiring more margin) than just a long position in futures?

For synthetic stock positions though, it seems to be similar margin requirement to just long underlying. E.g. with SPY.

My experience with futures options with IB is that they calculate every futures option position according to SPAN with no regard to any other position you have, where as any other broker would calculate the two option position together if you enter the position together, which would lead to a more rational margin requirement. It doesn't make sense but it generally explains their futures margins.

 

[Chubbly]

My experience with futures options with IB is that they calculate every futures option position according to SPAN with no regard to any other position you have, where as any other broker would calculate the two option position together if you enter the position together, which would lead to a more rational margin requirement. It doesn't make sense but it generally explains their futures margins.

No, they have bizarre calculations of how they calculate margins. I can only lose $75 on this debit spread but they want $13,486 for margin..... IB support confirmed this is correct
This is a totally irrational margin requirement

 

[Sig]

No, they have bizarre calculations of how they calculate margins. I can only lose $75 on this debit spread but they want $13,486 for margin..... IB support confirmed this is correct
This is a totally irrational margin requirement

It is completely irrational, I'm with you on that. I'm just telling you the route they arrived at it by calculating SPAN on each leg in isolation and ignoring the reality of the spread. I'll spare everyone here my usual rant on their lack of intellect.