Can anyone explain how IB`s margin works, I have a 100k gbp position and its tying up about $8000 of margin, this does not seem to be 2%.
My position is down to 100k USD and it's taking 4000k in margin I am down $100 on this position. This seems to be 4% not 2%, what am I missing?
I hate calling them, but I have a feeling I know what it is. My account is in canadian $, a gbp/usd position in the minds of IB creats 2 position I quess. A gbp/cad and USD/cad, that is the only thing I can think of.
If your base currency is CAD, your trade in cable will generate cash positions in USD and GBP. How you got the positions will no longer matter. We will apply margin in CAD = 2%*GBPposition*xrateCAD/GBP + 2%*USDposition*xrateCAD/USD 100K GBP will be 2K GBP margin, at current prices, roughly 4000 CAD. If you got into it via USD, then your USD position should be of roughly equal value and will also produce 4000 CAD margin, together 8K. Please email me if this is not the case. I set up the FX trading model so if it doesnt work the way I said I need to figure out what is going on.
I understand what`s happening, i do not think it makes alot of sence. Why would you need double margin for a gbp/usd position on a Cad account, when you would not need it for USD account. It is not double the risk for IB, it actually is a less volitile pair than gbp/cad. I think your system should just take the usd equivalent and multiple by the USD/CAD exchange and make that the margin required. You guys lose out for no reason because it cuts down on the size of positions for no reason. UOTE]Quote from IBj: If your base currency is CAD, your trade in cable will generate cash positions in USD and GBP. How you got the positions will no longer matter. We will apply margin in CAD = 2%*GBPposition*xrateCAD/GBP + 2%*USDposition*xrateCAD/USD 100K GBP will be 2K GBP margin, at current prices, roughly 4000 CAD. If you got into it via USD, then your USD position should be of roughly equal value and will also produce 4000 CAD margin, together 8K. Please email me if this is not the case. I set up the FX trading model so if it doesnt work the way I said I need to figure out what is going on. [/QUOTE]
Over all I applaud IB for its Forex product and am particularly impressed that improvements are continually being made. However, I do agree with GWAC. Margins really should be lower...at least for intra-day trades.
I actually brought up the same issue sometime ago, but I got no satisfactory answer from IB. My calculations also say that the risk of such a position is less than double, so IB's margin model must be wrong. (Unless I am wrong.... please corrent me.) Also, the increased 3,33% margin requirement for JPY on the grounds that it's more risky than other currencies must be wrong. Finally, the interest rate deals at IB aren't good at all. If you trade the minimum size (25K for USD), it's practically impossible to have a positive interest carry trade for most pairs that you should have. If I remember correctly, they charge and extra 1.5% over the base rate for short positions, and they deduct a 0.5% from the base rate for long positions. To make things worse the first few thousands of a long position don't receive any interest at all. Just to give a idea of the magnitude of the (hidden) costs that such a deal introduces: I had been trading on IB's IDEALPRO for a few months without considering at all interest rate differentials (thus, I could end the day carrying positive or negative interest trade with a probability of 50%). At the end of *every* month I had to pay interest. That interest amounted on average around 3% of my account. That's reallly too much! (Let's not talk about commissions) The interest rate situation is much better elsewhere. Eventually, I changed forex broker and my overall costs are now much lower. However, despite the high costs I had a good experience trading in IDEALPRO's ECN. I would consider getting back if the deal improves considerably.
Yes that is it. When two non-base currencies are involved, then there are 2 times an foreign exposure against your base-currency (CAD). In which case IB calculates 2 times margin. But you can solve it by changing your base-currency to USD (instead of CAD)...which I advise when you only trade Forex at IB and when you mostly trade pairs without CAD involved. In such a case only one time Margin is calculated (because only one non-base currency is involved). Changing your base-currency can be done in Account-management.
They are supposed to be lowering the Yen margins to 2% --. 3.33% is too high. I have not been wacked 3% over interest rates -my experience has been more positive--I have my base currency set to dollars. I would advise anyone that trades Ideal Pro --to switch their base currency to dollars.