I've noticed changes in my margin requirements when I buy a butterfly on ES options which I assume is considered commodities...I'm with TOS so my guess is most brokers are doing this I don't know why debit spreads and flys are charged....but they are
You would not have this issue if your were trading at an FCM, where futures are all they do. These retail securities brokers that also offer futures, don't provide the same service. Futures are not their primary business. See the attached PDF for the OCC requirement on 1 VIX Aug 14/16 call spread as of the close today. $30.00 for a PM account.
This response would be the most frustrating for me. The representative you spoke to had no interest in trying to understand the problem. This is a cash settled index, so there is absolutely no risk other than your initial debit.
ok so i got a reply from IB. vix options are span margined. "There is a calculated margin requirement for long VIX vertical option spreads. You will find this notation at the bottom of the Option Margin page at this IB web site link:" http://www.interactivebrokers.com/en/index.php?f=marginnew&p=opt
IB charges margin for ES verticals as well. I had 8k in cash and the only positions in my account were long ES put verticals. I was close to having auto-liquidation kick in because of a quick move against me, so I contacted IB. Got the span-margin runaround. If ES went to infinity, I'd still have 8k in cash in my account, plus a bunch of profits if ES went way down. WTF
This was about a month ago, but I will give you this example which is similar: August 15, 2014 1935/40 put vertical. Bid/offer is .50/1.50 If I try to buy 50 at 1.00, initial margin is $2,875 and maintenance is $2,300. Total cash outlay is 2500 plus commissions which I think would be $142. My near-liquidation was due to the fact that I had a decent profit in the spread, hedged via futures at another broker, then IB didn't update prices quick enough. My margin went down as the put spread value went down, but it was a close call.
IB has excessive margins on futures options. IB margin for an ES futures contract is $5750. IB margin for a 30 point OTM short ES call contract is $8910. How is it possible to lose more money on the 30 point OTM short ES call contract than being short the underlying ES contract? The obvious answer is that you can't lose more money being short the OTM ES call than being short the ES future. Whether it makes sense or not, IB just decides what they want to do and then just does it. Trying to get rational explanations out of IB is an exercise in futility.
I'm not understanding your situation. How much cash is in your account. What exact positions were you holding. And what was ES trading at, at the time? What you posted for margins used makes sense for your bearish debit put spread (long 1940, short 1935). Even if ES goes to infinity (or >1940), you should not affect your margin utilization because your losses are capped to what you spent for it, assuming your cash/free-margin levels haven't changed. If ES goes below 1939, you would profit. So I don't understand how you got close to liquidation, since it should realize its a defined risk put spread you have on and the losses are known in advanced. Unless you have other positions on that you're not telling us, leading perhaps to the system thinking you have some other options position on with a different risk curve. Or are you complaining about the fact when you put on the bearish put spread, IB reduced margin from you? So assume you had $10000 cash. You buy 50 debit spreads @$1 spending $2642, you're wondering why they reduce your available margin by around that much? If so, thats because long options are not marginable. You spend it, and you might lose it all and long options require 100% margining. So your $10000 cash is as if you just spent around $3K betting on long options strategy and you're left with $7K. Or, you're saying the margin calculated is based on the ongoing bid/ask quotes? So if a contract is stub-quoted, it may calculate a bigger loss on one end, even though it should be using the underlying's trading price to calculate maximum loss? Either way, even if they calculate margins based on the option's bid/ask quotes rather than the difference between the strike and the underlying traded price, I think the system knows your maximum loss is capped either way.