Sorry, we really cannot warn you a day before about future market move of such scale. It was an emergency case. We normally do not change margin during a day.
By when? I hope it is not going up 50% by expiration on friday. It would be a good idea to do this after expiration as I have dec and nov positions on.
14 November 2007 Change in Margin for Short Out-of-the-Money Equity Index Future Options Please be advised that per IB's plan to more accurately reflect the risk of short out-of-the-money equity index future options, the margin requirements on these products are being incrementally increased. An increase in the weighting factor, from 12.5% to 13.5%, is scheduled for today, 11-14-2007, and will be implemented starting at 11:00AM EST. To evaluate the potential impact on your commodity margin requirement, take the total (-30%) P/L value from the most recent Stress Test Summary (available in Account Management / Report Management)and multiply it by the weighting factor (in this case 13.5%). This will approximate the new overnight commodity margin requirement. Note - if the SPAN margin requirement is greater, then SPAN will be used. Please manage your risk accordingly.
They will do it at or close to expiration so you have to buy when IV is high (or they can sell when IV is high). They are going to increase the weighting factor again 3 pm today. Be careful. Long IB stock now. They know how to make market without taking any risk.
We are doing it gradually. Market making has noting to do with it. Heavy exposure of customer portfolios to extreme risks does.
In my a/c this morning overnight available funds were 36% of my capital with IB. This afternoon this has been reduced to 31%. During the day I have not done a single trade. I have got one short position in Z at 5950 (Index at close 6446) which is 496 points out of the money and expires this Friday. To cover my short I have one long position at 5600. Other short positions are more out of the money and all expires this Friday. I only sell options for the near month What is the justification of reducing my overnight funds from 36% to 31%?
If you are doing it gradually with a plan, why can't you give us the schedule how you will change the weighting factor in the future? Do you have a plan? We need the schedule so we can monitor our leverage properly.