Discussion in 'Options' started by WD40, Aug 21, 2007.
It hasn't been an easy month.
Do you know anybody's Credit Spread got hit ?
It must hurt.
However, thanks to the Fed it wasn't as bad as I expected.
Let's just call it an interesting learning experience. IC on RUT and OIH. The rollercoaster ride was fun and instructive. I thought VIX at 25 was "as high as it could go" until it ran over 35.
25 was not even that high a few years back LOL
Some pain was felt but August is done and September is right in front of us.
I heard even more people got smoked on the opening settlement prices in stuff like the SPX
Actually, the opening settlement is what saved my RUT IC!
of course option sellers got hurt. before all this started my closest short put was a lot of 720 er2 septembers. because i actively protect my account, i worked very hard buying back, rolling down, etc. i now have essentially debit spreads (ie:long puts above short puts).
my account took a dd of 5% for aug. it would have been 10% except for the fact i was heavily short call spreads that are now closed because i wanted that money, instead of hoping that it would expire worthless.
my last run of sleepless nights as bad as this was somewhere in 1999. 911 was not this bad to me as i was always more of a call seller. here i was stupidly overleveraged on short puts.
i survived, and hopefully better for it.
I was talking about the firm guys and mm's in the SPX from 3:30 on there were basically no markets in the 1420 and higher calls. We had one desk call us and ask us for a price in the 1430's after the cash closed because the floor market was 1 dollar at 5 dollars 10 up.
Unfortunate to hear that you are down 5% of your capital this month. On the other hand, that's not bad considering that the market drop in the past few weeks was very severe. Also 5% is not bad for you cause you should make it up in one month. For you to loose only 5% drawdown in this kind of market is a good result i think.
I too got in trouble but that was because IB doubled margin. As soon as that happened i was in trouble. IB closed some of my positions twice during the past few weeks without telling me about it because I was breaching margin limits. That was quite an experience and very scary because you do not know what else IB would do. When VIX was around 35 and ES was around 1375 my net liquidation value was around 27k of my original 52k. This would have been waay more that a 5% DD. Was your liquidation value at similar values.
Did you have similar problems ? Was your margin stretrched. The reason I ask is because you make about 6-10% a month and that must involve quite a few short positions. Are your positions Credit Spreads hedged by Debit Spreads? My positions involve ratio spreads which means i have 2 shorts for every 1 long position. On top of that I also have debit spreads closer to the underlying to also partially hedge my ratio spreads.
Can anyone please explain how IB calculates span margin. They have a brief explanation under help but it doesnt help much. Is there a formula of how equity and commodities overnight and daily margin is calculated ?
Any help is appreciated.
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