Think about what you posted "lets face it there is virtually little risk of blowing up to the upside....calls are cheap" There are plenty of traders who short stock and short calls. Can't short a straddle or strangle without being short calls. Shorting cheap calls in a bull market is not a money maker. Plenty of risk of the shorties blowing up with a strong upside move.
the timing of this "NEW" obfuscated fee couldnt have been more of a coincidence with the trend of declining profits for all Trading houses. ha ha from the owner of IB.. straight from the horse's mouth.. http://www.elitetrader.com/vb/showthread.php?t=284420 Thomas Peterffy: Elite Traders, please trade more! We are not making any $$$. see. if they really are worried. just simply increase the margin requirements. why come up with this complex exposure fee.
I fully agree. If it to reduce risk, change the margin requirements. With the auto close option of positions at IB, the risks should be very low because when the margin requirements (already now) will not be met (and thus trigger auto close of positions) this will happen long before the limits of an account are reached. This is clear for everybody. Also, the 30% is unclear and applies to all (individual stock as well as indexes. The latter have much lower overnight risk than the individual stock options). Further, they can make it 40% without any notice... If it is to improve the results, better increase the normal fees, instead of these kind of complex hidden fees, which are significant as it is a daily fee. If you want a suggestion to improve the results, please stop the development of the Mosaic platform. It is terrible compared to TWS. Many $$$ to save here ...
Two ways to look at it. Greed OR , profits are not high enough to buffer the high risk trading many attempt (you know , pennies in front of steamroller), So IB can just gamble , or they can charge up front for your assumed extra risk.
I understand you reasoning, but do not expect IB to have any extra risk 'pot'. They will just comply with the regulations just like any other broker. This additional fee will just be added to the profit and then they distribute that as dividend to the owner(s). No additional security for us traders.
You are correct. It's just an extra fee for revenues to cover risk. It does not provide any benefit to other clients that don't take on risky positions. And just to clarify, "They will just comply with the regulations just like any other broker," is not accurate. Every Prime Brokers at this time has house rules that far exceed the OCC regulatory requirements for PM accounts. 1245
My AUM is $5M, my Excess Liquidity is $2M, my new Exposure Fee would increase my lending rate from 50bp to 55bp, so there is no deal in town that cheap. I, too, am concerned about lack of clarity. Aren't there regulations prohibiting "We can raise your fee anytime for any reason" statements? This week, I will fiddle with Risk Navigator to at least see how certain changes will alter this. I am all-long, so I assume some offsets will cure it. If that's the case, why bother? If the offsets mature out-of-money, they will cost more than the 5bp. BTW, I used to be with GSEC, and their Portfolio Risk calculation was way more strenuous than whatever this is.
This is IB trying to protect themselves. We have essentially had a blowoff in terms of volatility from everything I can gather. This thread reminds me of the gold and silver threads from '11 when everyone was mad at the exchanges for raising the margin requirements. It's self preservation. I'm sure IB has way to many people that are short vol. right now and they want to make sure they can protect themselves. It's just like when they raised the margin on the front end vix futures spreads in jan.-feb. of this year.