IB - Portfolio Margin have higher requirement than Reg-T!!!

Discussion in 'Options' started by ofinance, Jul 30, 2012.

  1. ofinance

    ofinance

    To hold 3 short strangles on GOOG, SPY and AAPL with a net credit of $4,600, Reg-T required margin is 24k while for Portfolio Margin its 35k. Hope some IB representatives can shed some light on this, it really doesn't make any sense that PM have higher requirements than Reg-t, in the worst case scenario it should have the same requirements as reg-t. You don't go through the hassle of applying for a pm upgrade and wait for approval just to to get less buying power than before :confused:
     
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  2. d08

    d08

    PM only benefits accounts with a significant number of position (3 isn't significant). IB has done a great job informing traders about this, ignorance is not an excuse.
     
  3. ofinance

    ofinance

    Its actually 6 considering a strangle is composed of 2 options positions but you must know this already as you seem very smart.
    I will repeat my question and maybe you will read it right this time: HOW COME PORTFOLIO MARGIN AT IB HAVE A HIGHER REQUIREMENT THAN REG-T?
     
  4. d08

    d08

    Because portfolio margin is calculated differently, it doesn't say anywhere that PM ALWAYS allows greater leverage - in fact the opposite.
     
  5. Just out of curiousity, are you over concentrating the amount of cash in your account into these few trades?
    And do you have a past history of over concentraqting in your account?
     
  6. 1245

    1245

    The only time Reg-t requirements are lower than PM is when you buy options under $0.375. You should call your broker and check the calculations.
     
  7. 1245

    1245

    This is not accurate. PM is risk based and Reg-t is cash based. Reg-t looks at max risk. PM looks at risk from shocking a portfolio then some brokers add a risk premium for certain positions. PM is always better unless your a buyer of cheap options. Reg-t requires you to pay for the options, PM requires margin of a min. Of $0.375 per option.
     
  8. Reg T is a fixed % of the notional. PM is calculated based on 1,2,3 sd moves in the underlying and takes volatility into account.
     
  9. ofinance

    ofinance

    I don't think 6 different option positions is too concentrated considering 2 are on the SPY...Maybe IB calculate PM buying power differently from the official OCC rules.
     
    #10     Jul 30, 2012