I'm not buying it. The issue is leverage and undercapitalization.
Your experiences with being auto-liquidated by IBKR's strict risk management
- Thread starter helpme_please
- Start date
Hi
When an action causes a bigger damage than it tries to avoid , becomes an unfair action.
And its usual for the IB autoliquidation system to do that.
And the leverage. The fact of taking the money to the limit does not mean that has to be mistreated.
Those who trade options know that it is unfair to launch a market order to close a position.
There are so many things in that system that could be improved, but sincerly think they are not interested. For sure they make money.
thanks.
When an action causes a bigger damage than it tries to avoid , becomes an unfair action.
And its usual for the IB autoliquidation system to do that.
And the leverage. The fact of taking the money to the limit does not mean that has to be mistreated.
Those who trade options know that it is unfair to launch a market order to close a position.
There are so many things in that system that could be improved, but sincerly think they are not interested. For sure they make money.
thanks.
Just got F*kd by IB's auto liquidation!
I had a bunch of multi leg SPY spreads, with a small delta.
I got early assigned this morning on 65 puts 2 days to expiry and found myself with 1.x Million worth of spy on a 70k account, so margin deficient, fair enough. Since the assigned options were offset by other options in the spread, my net profit didn~'t change, and delta increased slightly, expecting ~+- 500$ per SPY point.
Problem is when I tried to liquidate this morning by closing the offsetting long put and sell the stock, IB's TWS stops me saying I am trying to sell a combo and I don't have permissions. whaat?? I'm already trading options entered via spread orders, wtf??. I go to my account management, I don't see anything related to combos as a separate trading permission. In the meantime, IB starts auto-liquidating -- and besides the stock, partially liquidates my other, multi-leg spreads *at market* on all legs hitting me with massive bid-ask leakage --and doesn't sell my original offsetting puts at all.
Result: 28k realized loss instead of +-500$ on a 69k net liquidation value prior to liquidation.
If they had sold 65 of the offsetting puts at market I would have a small bid-ask loss, prob not more than -1k.
How is that not unfair? Do I have any realistic recourse here?
I had a bunch of multi leg SPY spreads, with a small delta.
I got early assigned this morning on 65 puts 2 days to expiry and found myself with 1.x Million worth of spy on a 70k account, so margin deficient, fair enough. Since the assigned options were offset by other options in the spread, my net profit didn~'t change, and delta increased slightly, expecting ~+- 500$ per SPY point.
Problem is when I tried to liquidate this morning by closing the offsetting long put and sell the stock, IB's TWS stops me saying I am trying to sell a combo and I don't have permissions. whaat?? I'm already trading options entered via spread orders, wtf??. I go to my account management, I don't see anything related to combos as a separate trading permission. In the meantime, IB starts auto-liquidating -- and besides the stock, partially liquidates my other, multi-leg spreads *at market* on all legs hitting me with massive bid-ask leakage --and doesn't sell my original offsetting puts at all.
Result: 28k realized loss instead of +-500$ on a 69k net liquidation value prior to liquidation.
If they had sold 65 of the offsetting puts at market I would have a small bid-ask loss, prob not more than -1k.
How is that not unfair? Do I have any realistic recourse here?
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Thx for asking - since I was already way maxed out on margin d/t the assignment, I thought I wouldn't be able to close just one leg as I would then be margin deficient on the short puts. That said, I was also trying to reduce my execution risk (lol !!!) by doing the transaction as a spread, and I spent precious time trying to figure out why TWS wouldnt let me sell a synthetic call.
Anyway thx to Trump's China tweet I was able to bring my account from 30k back to 70k, but for a while I was contemplating early retirement as a wandering mendicant in the Himalayas...
I think the takeaway is portfolio margin is imperative with IB for options (I would have been under 40% margin under portfolio margin), and you can't rely on the auto liquidation algos with spreads.
In the end I was lucky today, but otherwise I was another closed retail account statistic on an expected 2-3% risk trade!
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Yeah, glad it worked out. I guess I don't relate to the situation that well, as I don't put on positions that large relative to my NetLiq. Pretty unnerving for someone to think that they have a defined risk spread at play, and then when one of the legs is assigned and be left at the mercy of IB's risk mgmt calculations during a time of high volatility that aren't taking offsetting positions into consideration.
There is a lot of good things about IB, but their auto liquidation system is so customer unfriendly I would never recommend them for anything other than buying options. Your situation illustrates this perfectly. There was no greater risk when you were assigned, as you had options against the position, in fact there is less. This is all about margin from your assigned stock. What a firm "should" do is allow you to meet the margin call or allow you to close the position in the most efficient way possible, which here would be entering and order as a spread to sell your stock and your puts. If you don't do this they should do it this way.
For those people who say "I'm glad they auto liquidate, it protects me" that's BS. If someone is short a put spread and are assigned on their short puts, they now have a less risky position. There is no urgent need to immediately liquidate everything (as opposed to being short puts when the market is falling, this is when their is an urgent need to liquidate immediately). This creates more risk and losses, which is more dangerous. Suppose the trader has a butterfly as part of their position, auto liquidate sells each leg out separately for a huge loss.
For those people who say "I'm glad they auto liquidate, it protects me" that's BS. If someone is short a put spread and are assigned on their short puts, they now have a less risky position. There is no urgent need to immediately liquidate everything (as opposed to being short puts when the market is falling, this is when their is an urgent need to liquidate immediately). This creates more risk and losses, which is more dangerous. Suppose the trader has a butterfly as part of their position, auto liquidate sells each leg out separately for a huge loss.