https://www.businesswire.com/news/h...-Brokers-Issues-Statement-Crude-Oil-Contracts Interactive Brokers Issues Statement on Crude Oil Contracts and Margin Loss April 21, 2020 04:01 PM Eastern Daylight Time GREENWICH, Conn.--(BUSINESS WIRE)--Interactive Brokers Group, Inc. (Nasdaq: IBKR) today noted that, as has been widely reported, the energy markets yesterday exhibited extraordinary price activity in the New York Mercantile Exchange (NYMEX) West Texas Intermediate Crude Oil contract. The price of the May 2020 contract dropped to an unprecedented negative price of $37.63. This price was the basis for determining the settlement price for cash-settled contracts traded on the CME Globex and also on a separate, expiring cash-settled futures contract listed on the Intercontinental Exchange Europe (“ICE Europe”). Several Interactive Brokers LLC (“IBLLC”) customers held long positions in these CME and ICE Europe contracts, and as a result they incurred losses in excess of the equity in their accounts. IBLLC has fulfilled the firm’s required variation margin settlements with the respective clearinghouses on behalf of its customers. As a result, the Company has recognized an aggregate provisionary loss of approximately $88 million. The Company does not believe that any anticipated losses will have a material effect on its financial condition.
Hmm, it doesn’t say that customers lost that much, but “Company has recognized an aggregate provisionary loss of approximately $88 million.” So the customers could lose much more, just without a loss to IB. Or are they both one and the same? Or IB isn’t going to lose?
My thoughts exactly. I'm afraid of what will happen once Peterffy is out of the picture - he's an old-school trader and risk manager to the core. The same can't be said for ET retailer yahoos or the assorted FinTech bros, or these days even the big Wall Street firms.
It makes you wonder if IB may have applied margin that didn't take into account that prices could be < 0. ie - maybe you could sell a $10 put - and IB maxed out the margin requirement at $10/contract??
It wasn't may options as they expired on friday. Thomas Peterffy said it was individual oil traders who ususally know what they are doing, then laughs, on the conference call.