how do the new margin rules for iron condors as detailed in http://www.moneyshow.com/trading/article/42/VideoTransTr-30529/Changes-in-Option-Margins/ effect those who open an iron condor with the call side say 5points wide and put side 2 points wide with IB, is this even possible with IB since the software has the iron condor setting set equally apart for the call and put side. so to do a 5 point and 2 point iron condor (or credit spreads), would it be seen as 2 credit spreads and we have to put up margin for 7 points? rather than 2 with the new rules.
Not sure about the new margin rules, but you should be able to build any iron condor you want by adding the legs in individually in SpreadBuilder within OptionTrader. It will quote whatever legs you enter all as one order.
All these questions can be answered by simply opening up TWS and playing around with the option trader screen. On IB you can create an arbitrary option spread up to 4 legs. 6 legs is not possible as 1 spread. They have canned "standard" spreads but you can create variations such as unbalanced butterflies and unbalanced iron condors. Regarding margin, if you open a standard iron condor where the strike difference on each side is equal then the margin used is the strike difference. e.g. call side difference = put side difference = 25: margin = 25 If you make the strike difference on the call side different from the put side then the margin used is the sum of the 2 differences. e.g. call side difference = 25, put side = 50: margin = 75
If you ever used option trader with IB you will know you use the "Option spreads" ,combo or leg by leg selection to create an iron condor, but either way IB have informed me that if a 5 point wide call credit spread is combined with a 2 point wide put credit spread, 7 points in margin is required.
Yes thats how IB informed me but with the new margin rules, if a broken wing iron condor is created its only 50 margin as opposed to 75 that would be required as in your eg
I donot understand this "broken wing". I execute iron condors which have equal no of points spread in calls and puts. Please explain. Thanks
just google it! loads on it, can use it if more bullish than bearish for eg but i'll give quick eg, if going to do a broken wing iron condor (where the call and put side widths differ) on SPY, eg 163c 170c 158p 150p you'd have to put up 7 points on call side and 8 points of margin on the put side, total 15points in margin. with the new margin rules as detailed in my 1st post you'd have to commit only 8 points in margin saving 7 points to do alternatives. IB can't let us taken advantage of these beneficial margin rules, so to do this broken wing iron condor, we'd have to open two credit spreads costing us 15 margin points