It mentioned "prohibit IRA accounts from holding naked short option contracts" not short index futures. You're just as likely to take a hit from a huge up or down move in a future (crop reports come to mind -- Trading Places).
yes, that is what it said. but it also didn't say what the margin requirements will be. if it turns out to be an absurd value, then you can do your own math.
I'd guess at least double. The goal I think would be to force those who are trading very close to the edge to leave as those are generally the most likely to incur a debit. It should make IB safer financially for the rest of the customer base ....at least theoretically.... then again let's see where they actually set the margin....
This is old news, but relevant to the conversation: http://forexmagnates.com/75-interactivebrokers-franc-losses-fx-futures-spot-fx/ Interesting that the margin was only 1% for EUR/CHF. So it seems that if you lose more than your account value with a regular account, IB can go after the difference, where with an IRA account IB has to eat the losses in excess of the account value (plus permitted contributions). Gary
Is there now anybody else who does allow naked short options positions, in IRA, futures options that is? IB has never allowed naked calls on cash stock/ETF's but has on futures, a distinction which only sort of makes any sense. Allowing short futures positions but not allowing naked short options on futures makes zero sense. The potential net loss is bigger on the outright trade because no premium to cushion it. Stating the obvious...but anyway I checked out TOS and they seem to have the same restriction IB is adopting. I'll only shift to them if IB really balloons up the margin requirements I guess. I'd prefer a single IRA account to do cash and futures stuff, not big volume but really annoying to have this new restriction for what I do.
Gary: Unless the link is wrong, the linked story says 80% of the loses came from five non-US accounts and doesn't mention IRAs at all. The non-US accounts couldn't be IRA accounts. A number of years ago there was a thread about exercising of some call options held in an IRA account. They were exercised and there were insufficient funds to cover the called stock. So IB sold on the open on Monday. The stock sold for less than the exercise price. The account took a hit greater than its equity. Thus, a debit balance. The account owner had to pay up. The account owner was also probably fined by the IRS for an excess contribution as the debit was greater than the allowable IRA contribution at that time. Jack
Agreed. The reasons I found the article interesting and I thought others might as well were, 1) IB is sitting on losses of $120M, mostly due to futures and not FX, 2) there was 100-to-1 leverage available with the EUR/CHF contract, and 3) IB is trying to recover those losses from the account holders. So it would seem that the CHF de-peg was a wake-up call to IB that it needed to reduce the leverage available to IRA accounts, assuming that IB would be responsible for the excess losses as they implied in their announcement sent out today. Gary
Both IB and FXCM are sitting on extensive losses not due to futures specifically but due to the CHF debacle which *happened* to have been used by specific clients via FX futures *and* in addition not limiting leverage on pegged currencies regardless of futures, spot, whatever. That's where the real problem comes from, IMO.