With portfolio margin you can get up to 6.66 leverage in theory (for equities). An interesting question is, what is the maximum leverage that you can execute in the opening or closing auction? For example, if you have a portfolio at 6.66 leverage and you liquidate the entire thing at the close (ie using MOC orders), you execute 6.66 leverage in the auction. If you simultaneously open a new portfolio while closing the old one, you could execute a total of 2 x 6.66.. = 13.33x in the auction. Since the buys and sells are simultaneous you never actually go over 6.66 worth of open positions, making this theoretically legit under portfolio margin. I asked IB if this was possible to do and the answer was no, because they calculate based on outstanding orders (not open positions) and this would require 13.33 worth of unexecuted orders to implement. Are there any brokers who calculate differently where this model of trading would work?
I'm a quant, not discretionary. 6.66 isn't a big deal if you know how to construct a well hedged portfolio with hundreds of stocks. If I were a big risk taker I'd just go prop, some offer much more leverage than PM - but the idea of wiring my money to some shady offshore outfit scares me much more than high leverage does.
I don't think separate events are ever "simultaneous" when it comes to exchange-generated events (unless you're trading with yourself, which is of course illegal) -- the broker receives executions sequentially. When you look at a FIX feed or the TotalView feed, events always come one at a time, timestamped to the nanosecond in the latter case. Some brokers (e.g. Lime -- or at least they used to, for accounts >>$1 million) give you a multiple of the PM as buying power, for example 5x, so it's really like 33.33x margin in terms of your open orders. But you still can't exceed that in terms of what's executed, or else you'll end up with one heck of a margin call.
Thanks - very nice, that sounds like exactly what I'm looking for. I've been researching several strategies where the extra BP for open orders could be super useful. My account isn't at $1M yet but good to know it's out there, aspirationally.. or at least was. I'll try contacting them to find out. Would be interested in any other suggestions people have as well.
You don't have to wire your money to a shady offshore outfit, Rob Friesen who runs Bright Trading ( Las Vegas ) lives in nearby Langley. Of-course with a prop you run the other trader risk.
True, Bright is maybe a bit of an exception in that respect... the thing is though, they don't have very good rates (more expensive than IB in every aspect) so it's not that interesting unless you are really capital constrained and/or can really take full advantage of the massive leverage. Commissions and interest rates tend to be significant costs for the kinds of strategies I do.
This is difficult to explain in this way, but I'll try a short explanation. Feel free to call me for a better explanation. For an account under $5mm, the clearing broker must calculate Day-Trading margin in real time based on time and tick. For accounts over $5mm, they are not required but typically do. At anyone time during the day, you can not exceed your BP or you will get a DT call. PM is only calculated at end of day based on the TIMS method from the OCC. Your software is typically set at or below your BP to protect from a DT call. So your limits are set from DT not PM calculations. Of course in practice this is the same thing unless you have option positions. In your example, if at the close or any other point in time, if you were to try and enter new orders before you close the old one, your software should not allow that. If you could, it is likely that your clearing firm will issue a DT call even though you are Closed/Open. You need to close a fraction of a second before you open. For accounts over $5mm, the broker/clearing firm can provide excess DT BP if they choose to. Bob
You can or could previously enter new positions in the last 30 minutes of RTH if the previous ones are set to close with MOC. The logic behind it was probably that since you're exiting these in any case, there is no margin violation to speak of. You can see this by yourself by using "check margin impact" in TWS. Now, if you enter new positions at 15:35 then you're still in violation (since closing auction hasn't started) and auto-liquidation will start at 15:45 or thereabouts. But if you enter say 15:55 then you should be fine as the auto-liq in most cases gives you a 10 minute warning.
Bob - Thank you, that's very interesting. Is that ability to not calculate DT margin in real time for large accounts (>$5mm) the same thing as what Occam mentioned in his post or is it something else? d08 - Interesting, why 30 minutes? Do you mean that the margin corresponding to those positions is considered freed up once the MOC orders have reached the point where they can no longer be cancelled? That is typically 10 or 15 mins prior to close depending on exchange In any case, I'll try playing around with it in TWS as you suggested.