New option margin rules - brokers using them?

Discussion in 'Options' started by ArchAngel, Feb 6, 2001.

  1. I currently use Preferred Trade, but after several days of email exchanges I've found that they aren't planning to implement the newer, more favorable margin rules on hedged positions (e.g., long equity/long put, etc.).

    Looks like MrStock has already implemented these rules.

    Anyone have any experience with these guys?

    Also, anyone know of other brokers who recognize the newer margin rules?

    I've had good luck with Preferred, but really want to be able to take advantage of the more favorable requirements for these type positions.

  2. BigEd



    I got tired of waiting for real options on Cyber and finally went with IB for options. I did so with low expectations, given the many questions everyone seemed to have with them in the beginning. Don't have any idea on the margin rules, though. So far, I've been pleasntly suprised. I'm sure I'll have a different opinion once I have a problem, but as yet it hasn't happened.

    The Java based TWS is still new for me, but the hot key definitions suggested by Privateer work great and have made order entry and changes much easier than with Preferred.

    Haven't traded any equities there yet, but for the size trades I typically do (250-500), the commissions would be a big savings over cyber. Cyber seems to have reached a plateau in the progress department re: lean, mean and reliable executions and they are not getting the raving reviews they used to before Schwab took over.

    RE: IB... 'DEF' (an IB person) seems to monitor this board on a frequent basis and posts answers to user questions. Maybe he'll pick this up as well and answer the question.

    How about it, DEF?


  3. Hi Arch - nice to hear from you again - how is your project doing ? Some time for trading left ?

    Hello Ed, nice to hear you're happy with IB. Just want to confirm, that equity-trading with IB works as fine as options-trading.

    Margin-rules IB :

    you'll find them here :

    Good Luck &
  4. Hi guys - I checked the IB site but it doesn't look like they use the newer margin rules.

    Mr.Stock is looking good from that perspective. I've got an email into Wall St Access about their margin rules (couldn't find them on the website). Also, Benjamin & Jerrold I believe uses the more favorable margin rules but I've heard mixed reviews.

    Anybody else got an idea for an option broker that recognizes the newer margin rules?
  5. BigEd


    Arch. I have an account at Ben & Jerrys also. I made the mistake of letting them trade it for a while - what a huge mistake. On top of very expensive fees ($50+ exchange fees per trade), they never made a winning trade and always had 3 legged spreads (3 commissions in and 3 commissions out).
    Their web site is barely adequate.

    Bottom Line - They churned my account so I cut them off.

  6. def

    def Sponsor

    BigEd et al,
    I know IB is will soon be implementing SPAN marginging but to be honest I'm not sure if that can apply to equity options (regulations). IB's forte is option trading and thus I have to assume the new rules will be put in place. I'll have to check the status with the US office and get back to you here.
  7. def - the rules I'm referring to are already fairly old - the CBOE margin manual I have is from last April and it contains the new rules. Would be good to know if/when IB plans to implement them.

    SPAN isn't applicable to the equity markets and I would have thought you already used it for futures and options on futures (how else do you compute margin?).

    BigEd - thanks for the info on B&J - I've heard mixed reviews of them. Letting any brokerage trade your account often leads to churning (unless maybe if you have a zero commission, profit sharing deal with them so they're incentivized to make you money instead of rack of trade commissions). Last time I checked them, they were getting ready to roll out an online system. Sounds like it wasn't too successful.
  8. def

    def Sponsor

    aa- your comments make sense since the reply i got back from the states was they did not know of any "new" option margining rules. I believe the margin charged for equity/equity options does take into account the strategies you describe but I would need to confirm this with someone from the states. If I'm awake later this evening (US AM) I'll get the info otherwise, I'll post next week.

    Regarding SPAN for futures and future options. We've used an in house risk model which was fine for e-minis. However, we've expanded to add other products/markets like HSI(HK) in my neck of the woods and the ACE (CBOT) exchange in the states where SPAN margining will make a big difference and thus will be implemented soon.
  9. def - thanks. If you do get a chance to confirm with your US folks it would be helpful. The margin rules shown on the IB website are the old rules which don't reflect the more favorable treatment for hedged positions.

    If they are using the latest rules, it would be a good idea for them to update the website accordingly. If they're not sure what the "new" rules are - refer them to the Mr. Stock website - they recognize the rules. In particular, updated maintenance margin rules on hedged combos such as collars, long equity/long put, short equity/long call, recognition of "covered" positions other than just covered calls, special treatment of butterflies, etc.

    If they still don't recognize the rules, let me know and I'll be happy to send them a electronic copy of the CBOE margin manual that I've got so they can read about it in more detail.

    One other thing - from the info on the website I couldn't definitely confirm this (or at least I couldn't find the right page), but based on the account types offered I'm guessing that your IRA accounts are stock only? Is that correct? I'd like to be able to do long options and write CCs. Both are allowed by IRS rules in cash accounts (including IRAs). Spreads are also allowed by the IRS and that would be great too, but at a minimum I need to be able to do CCs and long options in an IRA.

  10. def

    def Sponsor

    aa -
    our CFO is aware of the margin rules and has the CBOE margin manual of April 2000. I was a bit surprised when he mentioned that we do not currrently recognize long options vs stock as allowed in these rules. However he is reviewing all margin computations allowed by CBOE to determine what changes we should made to IB's system.

    Re IRA's: they were just added this week. At this time they are currently for stock only accounts (easiest to implement) but options are in the plans. No idea of a date on that.
    #10     Feb 9, 2001