This is how bad the IB Margin calculator and Support are
- Thread starter Chubbly
- Start date
Argggg! I've demonstrated over and over that YOU CAN'T LOSE MORE IN A VERTICAL DEBIT SPREAD THAN YOU PAID FOR IT! 'Murican option or European, IB can always always always protect itself in a way that would ensure they wouldn't lose a cent. Neither you or anyone else has shown this to be untrue, and yet you persist on acting as if it's possible to lose some huge amount on a vertical debit spread. The non-answers and ignoring facts are par for the course for IB staff, so I guess I understand that if you're into that kind of thing you'd also be fine with IB.
Everyone knows IB offers cheap commish and cheap margin loans, with drawbacks of quirky customer service and autoliquidation. Yet thread after thread after thread turns up hoping/wishing/dreaming IB would change. It's like a bad marriage. Spouses don't change -- save your breath. Accept your spouse as-is, or leave the marriage.
I have asked IB to escalate this to verify if this is working as intended or if it is an error.
All the agents I spoke to said they were able to replicate the issue so we ruled out that it was mu account or a problem with my client. I also replicated it in Demo and Live to rule that out.
The were supposed to get back to me today with an answer.
Unfortunately I live in Canada so brokers who offer options on futures are very rare.
I looked at RJO Canada and they wanted $15 per option..... ouch......
Thank you for elevating this, Chubbly. It is not a trivial matter, when it pinches us like it does. This does not need to be a "secret" -- IB could easily publish *exact* protocols for this and other duration rules that they've encoded, rather than having their customer base ferret it out.
(And thanks to IB for eventually standing up, but an asterisk on a margins page is just *not* a big deal. Come on, guys.)
I tried to get an update today. Apparently the Margins department is still looking into it. Not sure if that is good or bad.........
Although I like IB, since I'm trading with them.... what @Sig says is totally correct.
There is now way anyone can lose more than what you pay on a vert spread.... and to discourage people to trade further than 6 months away in S&P options is kinda silly. Less liquidity I understand, in small stocks... but ES/SPX???
It does look like they try to keep people from doing stupid things, but there's a limit to the nanny-state....
There is now way anyone can lose more than what you pay on a vert spread.... and to discourage people to trade further than 6 months away in S&P options is kinda silly. Less liquidity I understand, in small stocks... but ES/SPX???
It does look like they try to keep people from doing stupid things, but there's a limit to the nanny-state....
I did a debit spread on SPX ad SPY with the same dates and IB calculates those correctly but it is using the RegT calculatio. It is only on ES that it give a ridiculous Initial Margin of $13,000 and Maintenance Margin of $120. I have no doubt it is a bug in the way they calculate margin for SPAN.
They are still looking at it so maybe someone internally has realized how wrong this is.
It is disappointing to me that the 3 agents I chatted with I had to explain why it was so wrong. Also that I got bounced between 3 agents and we were doing the chat in a text session but they would never read what the previous agent had said. Each one would ask me to wait while they read the previous notes. But then I had to type out the whole problem all over again 3 times because they didn't read the notes.
I've gotta believe this is due to the way IB calculates SPAN on a spread. As you've encountered, no one there grasps the concept of a spread. So they treat it as two completely independent positions with no relation to each other. This is evidenced by the fact that they charge any margin at all on an ES debit spread, which can't lose more than you initially paid.
They calculate the SPAN margin on one leg, the SPAN margin on the other leg, and add them together to get your total margin. Note that this is most certainly not required under SPAN and I've never encountered another broker who does it this way, but IB does. For a spread that is some ways away, SPAN may very well calculate a high margin on your short leg and give you much less credit for your long leg. When added together, you end up with the nonsensical margin you see. They're not going to change this because it would require that they
a. Grasp the concept of a spread.
b. Make a fairly major software change that would only help a few customers who trade commodity option spreads and they're all about a 75% solution at the lowest possible cost.
The solution for you is to switch brokers, at least for commodity spreads. Almost all the rest coded this properly to begin with so it's not an issue. Plus avoiding just one frustrating encounter with IB staff has got to be worth any inconvenience you encounter switching. I can almost guarantee that their response to you if you ever get one is that they're following SPAN and have no choice in the matter, which is completely untrue but not worth fighting.