IB really doesn't offer 4 to 1 margin

Discussion in 'Retail Brokers' started by deadreader, Oct 9, 2003.

  1. Not that I should be or want to be using 4 to 1 margin, but it's interesting that TWS only lets me place orders using no greater than 3.301 to 1 margin. (It's been this way ever since I could remember)

    Why is this?
     
  2. Htrader

    Htrader Guest

    I'm not exactly sure what you mean. IB always allows me to buy up to 4x my equity on marginable stocks. Are you trying to short stocks below $17? The margin calculations are different for those securities.

    Edit: In retrospect, you are right about the 3.3:1 ratio when it comes to shorting stocks as IB requires a minimum 30% margin rate.
     
  3. Digs

    Digs

    hTrader , is that right, where are those shorting margin rules on IB website ???
     
  4. Htrader

    Htrader Guest

    ---
    Maintenance

    Maintenance margin requirements must be satisfied at all times or account positions may be liquidated in accordance with the terms of the Interactive Brokers Customer Agreement.


    Long Positions: 25% for marginable stocks and 100% for non-marginable stocks.


    Short Positions: If last sale price/share >= $5 then maximum ($5 per share, 30% * marginable stock value). If last sale price/share < $5 then maximum ($2.50 per share, 100% marginable stock value). Short sale proceeds are applied to cash and the short position is subtracted from equity.
    ---

    Note the very last paragraph. This means that for when you are shorting stocks, you need to put up either $5/share OR 30% of the stock value, whichever is higher.

    In practical terms, this means that for stocks under $17 you will not have the 3.3:1 margin. Your leverage decreases incrementally as the stock price decreases until you reach the $5 stock price, at which point you are only getting 1:1 margin.

    You continue to receive 1:1 margin up until the $2.50 level. After that, any shorts below $2.50 will be treated as if the price was $2.50 for margin purposes, even if the stock price is only $1.
     
  5. I have a question about margin with IB. The site says the margin for vertical option spreads is the distance between the strikes so if I buy XYZ 50/55 call spread, margin is $500 per single option contract. If I leg onto that spread by selling the 55 first (which at that time is a naked option call requiring higher margins) then 10 minutes later buy the 50c (margin is complte cost of 50call). Will margin money be released since the naked call is now hedged with long call? Does that happen (assuming it does) instantaneously upon purchase of ong call? Thanks
     
  6. Steve_IB

    Steve_IB Interactive Brokers

    Yes, it should happen instantaneously.