If it's $13.75 and a $1000 multiplier and you're buying one contract if we assume VIX can't go below zero the max loss would be 1/3 of the margin. Does that make sense?
Yeah you'd figure their margin calculation would take into account a MAX() function of some sort. Meaning margin required can never be larger than the intrinsic value of the actual contracts being traded.
And now the margins are back to where they were ($10311 for front-month VIX futures). It looks like the tripling only occurs outside of regular trading hours.
IB routinely liquidates spreads because the best bid/ask is outside the intrinsic value of the spread, i.e. you can by definition only lose $500 on a 5 point SPX credit spread but they'll show it as a $600 loss if the best offer is $6 and liquidate you if that puts you out of their margin requirements, which isn't uncommon if the spread moves far out of the money. In other words, they have no concept of the idea that margin shouldn't exceed to total risk of a contract. If you talk to them about it their customer service reps either don't grasp the concept because they didn't teach it in high school, or if you do get the occasional one who does understand it they claim they can't do anything because the autoliquidation algorithm is apparently a black box handed down on Mount Sinai that everyone the must follow blindly.
Makes no sense. Meanwhile, the IB page describing IRA trading permissions directly contradicts itself on whether futures and related products are allowed. http://ibkb.interactivebrokers.com/node/188
When you setup an order in TWS, before you submit it you can click "Check Margin Impact" on the Order Ticket to display the Order Preview screen which shows you the margin requirement for the position. Unfortunately, it only shows you the margin required for the session you are currently in (day or overnight) at the time you check. It would be ideal if it showed you the margin for all sessions so you know what you're getting yourself into from a margin liability standpoint. This is especially needed when brokers impose their own house margin rules beyond exchange minimums.
Can someone clarify/confirm what is the current day trade vs overnight margins on futures in IRA accounts, and when do they change? Is it clearly documented anywhere?
I don't believe IB offers different margin for daytrading vs overnight. The best way to determine your margin requirement is to stage an order and "Check Margin Impact" as Trader13 pointed out, because margin can change at IB. It is not based on Exchange margin and can change with market conditions.
I have not tried to document it but the margins were different overnight as of last month -- it may have changed and we all know they won't say a thing either way. I only know because I've had problems in my smallest IRA account with margin when I enter trades at night (which execute fine during the day). The margins are just ridiculously excessive at this point, for my smaller IRAs I'm going to have to move elsewhere -- I don't ride anywhere close to the limits but I can barely trade with these margins.