ES Options Margin Calculation IB

Discussion in 'Index Futures' started by Danny040, Jul 12, 2012.

  1. Danny040


    I like to write future options with my current broker at a small amount. Never over 20% of my required margin. Profits are small but good commissions kill me being far OTM.

    I understand this calculated using span + their own requirements.

    Considering switching to IB and have started the process.

    IB has much smaller commissions. But their auto liquidation scares me because I cannot find how it is calculated. Specifically, when the bid/ask gets wildly wide or non-existent what is the price of the option calcuated on? Therefore my margin requirement which triggers an auto liquidation? Is it the last? bid/ask? mid? I just dont get it.

    I've had a few margin calls with my current broker which involved a simple conversation less than 30 seconds. I refunded my account or sold positions to become in compliance but no liquidation ever.

    Im always hedged and dont want to get caught with my pants down. I'm a conservative trader who doesn't accept a margin increase lightly but as a serious threat let alone a threat of liquidation.
  2. so what is your question..
    I used IB.. and for E mini futures.. they usally block 5K for each future I sell. or buy.

    also, a side question.. if I hold a short - sell one future - and keep the short postion.. do they charge me any monthly fees or borrowing cost? etc..
  3. I was looking into this recently and based on what I saw on the IB site ( ), had the distinct impression that "incorporate extreme market moves in the underlying" meant just that, in other words a better safe than sorry approach.

    I checked with my broker and was told that SPAN is the only basis the Risk Management Department uses.

    IB however has its own requirements over and above, as you know.
  4. It just goes by your current liquidation value and maintenance margin, which they calculate and display to you continuously.

    The windows turns amber when you are within 5% and it sends email warnings as well as you get closer to a deficit (ending up with "about to liquidate unless you reduce your margin!" and then "liquidation commencing at any moment" or some such).

    It does not go just by bid and ask, which would obviously be wrong. In illiquid options in deferred months, they use a pricing model instead. (It can be off a little too though). They do not normally liquidate outside regular trading hours.

    They are never going to commit all of their precise parameters to writing, just as your other, current, broker is never going to commit to writing the exact guidelines either. I am positive that either one of them could be unreasonable under certain circumstances where they panic. You can file a claim against either one of them if that happens.

    If you want a broker who will let you go a little over margin from time to time, and I know many other brokers will, IB is not the best broker for you unless you decide to live with the reality that it may hack a little off your position on rare occasions. It is not the end of the world if it happens - they liquidate just enough to bring you back within margin. You can just take the loss (normally small) and learn from it.

    I have to concede that I have found circumstances in which their pricing model is considerably off on illiquid options in deferred months in other obscure commodities (not ES).

    If you are really hedged all the time, then your margin will reflect that of course and you will be ok with IB.