Does anyone know this letter? Does it exit also in IB?

Discussion in 'Options' started by tabasco mark, Dec 8, 2012.

  1. I have a portfolio margin in TOS ,
    I'm well above with the Option buying power
    and then I receive this Email :

    Hello Mark,
    We are writing to inform you regarding an increased option exposure in your account ending in ****. Your various positions, when stressed up or down 20%, now represent a theoretical loss of more than double the current equity in your account. Given this increased risk, we may require you to reduce the position to limit the total exposure. Do not sell to open any more options.
    If you have any questions or need further clarification please feel free to contact us.
    Trade Desk
    TOS - thinkorswim

    :mad: :confused:
  2. cvds16


    They are being nice ... at Interactivebrokers your position would have been liquidated the second you got over your limit (well actually they give you a few minutes to adjust ...; but you get what I mean)
  3. I have about half my money available
    as what they consider - available Option buying power .
    But now they added another criteria

    " when stressed up or down 20%,
    now represent a theoretical loss of more
    than double the current equity in your account.."

    There is a difference between these two criteria
    This one is more stringent
  4. cvds16


    ha, you must be gammashort, it's common use for option market makers (who have the best deals in this business ... ) to have such restrictions ... it's called the 'haircut' ...
  5. They are managing their risk exposure and in the process yours too.

    20% stress is not huge. With the fiscal cliff negotiations ongoing and success or failure just around the corner, would you bet your life against the markets moving up or down 20%?

    I wouldn't! All it needs is the catalyst and some big buy or sell program's being activated and you have your move.

    Look at it positively. In addition to protecting themselves and you, they also protect all their other customers by managing risk in this way. I'm sure you would not like to lose your money because other customers took on too much risk and your broker failed to manage this properly.

    Perhaps you could look into buying deep OTM Index puts and calls to protect your positions. See if 10% to 15% OTM is cheap, ask your broker if that would favourably affect the risk algo they use and act accordingly.

    In the current circumstances I personally would reduce my risk exposure fast.
  6. cvds16


    if you don't like it you could always move to IB, they might be a bit more lenient, but beware what you are asking for. IB is always right, no discussions, they know what they are doing, if strange things happen in the proces that lead to a cascade of closings (as have been examplified a few times on this board) it's basically your own fault as you tested the limits of their systems the really hard way. Remember being gammashort is a dangerous way to live lol
  7. cvds16


    Very good post !
  8. Thank you, nice of you to say so.
  9. sle


    This is probably an additional risk scenario implemented by your brokers (proper PM includes only 15% +/- shifts for single stocks). I'd say first you should figure out which position is bothering your broker and act accordingly. The shift of 20% is perfectly reasonable for single stocks, so if it's all coming from a single position, reducing exposure is the right way. On the other hand, 20% rally is totally stupid for broad market indices, so if your broker tries to squeeze extra cash to hold overnight (adding to your credit risk, if you have over 500k too), you should vote with your feet.
    #10     Dec 8, 2012