Interactive Brokers Incorrect Option Margin Requirements

Discussion in 'Options' started by frostengine, Sep 20, 2017.

  1. Sig


    That is strange behavior on IBs or any broker's side for a Reg T account. It really does sound like they mistakenly put a chunk of their PM code in the Reg T codebase.
    #51     Sep 26, 2017
  2. sprstpd


    Yes, is in cash account. I've never traded options so you'll have to be more specific if you want me to check option impact.
    #52     Sep 26, 2017
  3. Thanks for checking this. OK, I think I have a bit more clear picture now. I spoke to a bunch of people who have IB accounts, and it does seem to vary. I think what they do is they check weather or not you are delta neutral on vol a positions or have none then your margin is regular. If you start leaning short or long, they increase it. So they treat you as a market maker lol, this is just a theory but I think truth is somewhere close to this because: if I am long puts my initial margin goes up, if I start selling puts against those, my delta drops and initial margin drops. If I buy calls against long puts, my delta gets closer to neutral and margin drops, so they are trying to reduce your vol deltas by increasing your initial margin if you move away from being neutral. They are charging you 100 delta for options and 200 deltas for stock. Very nice IB.
    #53     Sep 26, 2017
  4. So true! This happened to me! Also, no margin offset for a call option and selling short stock in the same name, of course. And other similar issues. I feel like you people on this thread are my brothers in suffering. Wish I knew about this before, but of course mostly people get here AFTER they got smacked.
    #54     Feb 1, 2020
  5. Magnificent first post. On a thread which was dead for about 2.5 years. :(
    #55     Feb 1, 2020
  6. Issues the same. For me it is quite relevant and fresh. And let us be useful here: what are good alternatives to IB for futures and options? Other than tradestation..
    #56     Feb 1, 2020
  7. Hivey


    I too was very frustrated with them last Friday. Instead of making a nice profit, I lost some following their auto-liquidation rules.

    I bought three 2025 AMZN put options (long, not short) expiring the same Friday. Initially price went a little bit against me, but later price fell all the way to 2005. When the price reached 2025 again, the puts went ITM, but (to my surprise) were auto-liquidated (at a loss) at that moment.

    My available margin was around $45k (again I was long, not short). I later understood this happened because of "projected post expiration margin deficit". Apparently their algo decided I did not have enough $ to own 300 AMZN shares at expiration, however, my intend was never to hold until expiration, but sell before.

    Does someone know when this rule gets into effect? Only on the last trading day and if so how late? Or also days before last trading day? And do other brokers have a similar policy?

    I would expect a $50k account is sufficient to go long 3 AMZN options, but apparently not :(
    #57     Feb 1, 2020
    namegoeshere8 likes this.
  8. Hivey


    Ok, understand now IB does these post expiration-liquidations 2 hrs before close.
    Normally I don't play options on expiration day, but made an exception as opportunity was so good. Will buy next week expiration options going forward.
    #58     Feb 1, 2020
  9. You have just been IBMARGINized like so many around here. They almost act like they want you to lose. Apparently they do so to ensure they do not incur an unfunded loss (you lose more than your account) but the WAY they do it is simply unreasonable. In your case indeed the margin would be too high to hold after close but to assume one cannot sell 300 AMZN 1 minute before close is kind of ridiculous.

    If anybody can provide any info on their program and are they actually stock option market makers, please do so.
    #59     Feb 3, 2020
  10. ajacobson



    From what you describe it's a capital issue not an option dynamics issue.
    You are also going to need scale to justify the care and feeding of MM software.
    Last edited: Feb 3, 2020
    #60     Feb 3, 2020