Margin Requirement At IB For Options

Discussion in 'Options' started by syd697, Mar 16, 2006.

  1. syd697


    Can anyone explain to me why IB would charge me a $5200 margin requirement on a naked put sell on ISE stock at a $22.50 strike price for 1 contract? The most I could lose is $2250 if I got assigned and the stock went to zero. The way IB explained it to me is that since the ISE stock is currently trading at $52/share, that's what my margin requirement would be. Huh? What kind of logic is that? I'd be buying the stock at $22.50, but yet they want to charge me based on where the stock is trading today. Actually, according to the "check margin" feature that IB has, it was calculating my margin requirement to be for this trade at $4500, which is double the strike price. Doesn't make sense. I've been selling naked puts with IB for a long time and this is the first I noticed this type of calculation. It's eating up a lot of my capital. Plus, most brokerages calculate margin for a naked put sell in a much different way, which is usually a smaller figure. Anyone else noticing this issue?
  2. I assume you are talking about an IRA or a non-margin account of some kind. In that case, IB's web site says that NP's margin requirement is "100% of the aggregate put strike price", which as you say is $2250.

    I would call them back and recite their web site to them.

  3. syd697


    It is an IRA, but it's a margin IRA. IB actually called me back and said that I was right and that they are looking into it. I had to send a screen shot of the margin requirement for the trade. Let's see what happens.....
  4. dis


  5. luh3417


    At IB, Margin IRA just means the trades settle the same night, not after 3 days. It DOES NOT mean its a margin account with borrowing. Nobody is allowed to offer an IRA with that.
  6. syd697



    Can you point me to an area of IB's site that says their IRAs do not have the "usual" margin benefits, or at least somewhere that says no one is allowed to offer an IRA like that? I'm not disputing what you say, I just want to know for future reference in terms of what trades I might try to execute in the future. Thanks.
  7. What is the practical benefit of "settling the same night"?

    I have been trading in my IRA's for years with several different brokers and never encountered any practical implications to their 3 day settlement policy.

  8. ehmm...maybe to have funds ready to enter next trade without havin' to wait and missin' an opportunity?
  9. Quote from the IB website (not hard to find):

    "IRA Account Types

    US resident customers may open cash or margin Individual Retirement Accounts (IRA). IRA margin accounts may never borrow, but are afforded all the other benefits of a margin account such as the ability to day trade, and the ability to trade multiple currencies and multiple currency products. IRA accounts may be opened in any base currency, but when trading in a non-base currency product (margin accounts only) a currency trade must first be executed as you cannot borrow currencies. Customers are advised to consult a tax specialist for further details on IRA rules and regulations."

  10. Funny I never encountered that limitation in many years of trading in an IRA.

    Although I can't honestly remember that I ever needed cash from a prior trade to execute another trade, I gotta believe it must have occurred in the last say 10 years.

    Are you sure that you need settled cash to buy stock in an IRA? Although maybe this question is already answered because this no-longer sounds like a limitation with IB. Maybe most other brokers always had this capability.

    #10     Mar 20, 2006