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Test your knowledge of new IB margins!
- Thread starter weewilly
- Start date
IB has instituted a 30x rule that you will find no documentation on. That rule states that, if the sum of the notional value of your option positions exceeds 30x your account mark, you can open no further positions, even if the longs and shorts offset each other (as they do in this case).
There's also a 50x limit at which they start liquidating. They actually are documented here under "Time of Trade Position Leverage Check" and "Real-Time Gross Position Leverage Check." From the main page about margin, you have to click through under "A primer to get started with margin trading." It's definitely not the place you'd expect to see the only mentions of these rules.
In terms of the TWS display, is this reflected in the margin calculation in some form or is there just a "total notional value" figure buried somewhere?
It's completely separate from the normal margin calculation. There's "Securities Gross Position Value" under the "Balances" section of the account window (click the plus sign on the right if it isn't shown) and "Leverage" under the "Available for Trading" section. It'd be nice if order tickets would show the impact on leverage the same way they do for margin.
It's completely separate from the normal margin calculation. There's "Securities Gross Position Value" under the "Balances" section of the account window (click the plus sign on the right if it isn't shown) and "Leverage" under the "Available for Trading" section. It'd be nice if order tickets would show the impact on leverage the same way they do for margin.
I have plenty of spreads on right now, but my "Securities Gross Position Value" is only 40% of my net liquidation value, and my leverage reads "0.00". The total notional value of even a few of my positions (offsets notwithstanding) is far higher than this figure. I must be doing something right (or wrong?).
I've always had Leverage = Securities Gross Position Value / Net Liquidation Value. Don't know how leverage could be zero if you're not 100% cash.
As far as the low gross value, the market value of an option is used, not its strike. Could that be it? Do you have anything in your futures/commodities account segment? I'm not familiar with how that affects margin/leverage.
As far as the low gross value, the market value of an option is used, not its strike. Could that be it? Do you have anything in your futures/commodities account segment? I'm not familiar with how that affects margin/leverage.
My securities balance is 25% of the account and stays the same through the day, the commodities side is the other 75% and fluctuates as the market moves. I'm only running ES futures options spreads and everything is section 1256. If it's the market value of the option, it seems like these guys should never be able to get to 30X.
My securities balance is 25% of the account and stays the same through the day, the commodities side is the other 75% and fluctuates as the market moves. I'm only running ES futures options spreads and everything is section 1256.
In that case I think your numbers make sense. The "Securities Gross Position Value" doesn't include futures or FOPs. The actual leverage rule is Securities Gross Position Value <= 30 * (Net Liquidation Value - Futures Options Value). So the value of your FOPs affects your gross leverage limit, but it won't show up your account window (at least not in a way I'm familiar with).
It would require a large move causing OTM or ATM options to be deep ITM. The other way it can come up is if you leg into a conversion or box spread. I've never hit 30x, but have gotten somewhat high this way. It happens if I'm long a put that's become deep ITM and is trading at intrinsic value. If it's near expiry, I often find it cheaper to buy the underlying and pay the financing cost than to pay the higher commissions and spread to sell the put. If a $100 stock goes to $90, a $1 put might turn into a $10 put covered by a $90 position in the underlier, so 100x the initial notional value.If it's the market value of the option, it seems like these guys should never be able to get to 30X.