Please educate me about IB

Discussion in 'Retail Brokers' started by SProbability, Nov 16, 2003.

  1. I think IB provide a great service to the retail investor. It is fair to say that they have single-handedly revolutionised the commision charging structure in the industry. At the same time they are not perfect - is anybody?

    There are a few thing I find surprising with IB, but would rather give them the benefit of doubt till I am proved right or wrong. So please, fellow ETers your comments are solicited.

    First. As far as I know IB do not provide a Transaction History feature. What this means is that you can not view the trades you have made EXCEPT on the day of the trade. Why does this matter to me? When I prepare my Journal, I tend to use this feature, but it means that if I can't do my Journal on the same day as the trade, I have to use other means - like 1. log into IB website, 2. scroll through all my daily statements to find my trades & then match them up. Another reason why this feature (provided by many other brokers) is useful is that you can see at a glance (on the same line) your entry & exit prices for every trade you have made.

    Question 1. Am I beating about the bush, and does this feature indeed exist in TWS?

    Question 2. If not is there a legitimate reason for its absence?

    I like to swing trade equity options. One well known disadvantage of options are the wide spreads. I try to get round this by using limit orders and trying to split the bid and ask. So if an option has a twenty point spread and is trading at 6.20 - 6.40, I will place a limit at 6.30. So far so good. However, what I have observed is that my order is usually filled when the option is trading at 6.10 - 6.30. So rather than splitting the bid-ask as I intended to, my limit order only takes effect when the ask is at or lower than my limit.

    Question 3. Has anybody else noticed the same thing, or am I talking rubbish?

    I have looked at who most would agree are excellent for options. I decided in favour of IB, purely because I THINK they are three times cheaper. A round-turn at TOS will cost me $6 while with IB only $2. However, the guy I spoke to at TOS told me they have the best execution for options in the business, and that infact using TOS will work out cheaper than anybody else, simply because TOS will always get me in & out at better prices.

    Question 4. I am beginning to wonder if indeed TOS is cheaper (with slippage & everything else taken into account) IB. Has anybody here used both brokers? Is TOS's claim of being cheaper justified or is it just 'sales talk'?

    An oft quoted mantra is let your profits run. With options however, doing this creates problems of its own - the already wide spreads get even wider. Many times I end up with 40/50 point spreads. Luckily, there is a way round this, if the option is near expiry & doesn't have much time premium. What I do is exerise the option AND immediately enter the reverse position in the stock. For instance let's say I am long 5 XYZ Nov 2003 45 calls which are currently trading at 8.10 - 8.50 (40 pt spread), while the stock is trading at 53.22-53.24. Rather than sell 5 call options (at 8.10), I'll exercise the 5 options, and IMMEDIATELY sell 500 shares of XYZ at 53.22. By exercising, I am basically buying the stock at 45.00 and IMMEDIATELY locking in my profit by selling at 53.22. The problem is that IB do not UPDATE your acount with the exercise till the FOLLOWING DAY. So for margining requirements, IB has me NET SHORT 500 shares of XYZ. This has often meant that I can't initiate new positons on the same day(because IB thinks I don't have enough margin), but even worse I am not allowed to close other open option positions, because IB think I don't have enough margin.

    Question 5. Why do IB not free up your capital IMMEDIATELY (by crediting your account with the sale of the stock resulting from the option exercise) in the above scenario when there is NO RISK TO THEM whatsoever. I know for a fact that TOS definitely do this, and I think optionsxpress do as well. Will this have anything do with the fact that these two firms specialise in options, whereas IB does not?

    What do you think?
  2. gaj


    i log in to IB's website and can see every trade i made...

    (equities, no knowledge of other stuff)
  3. gaj



    >I like to swing trade equity options. One well known
    this is b/c of the cboe, option mms, etc. when the BOX starts, your bid will be displayed.
    (it's not unique to ib)

    >when there is NO RISK TO THEM whatsoever.

    i think there is, actually, but will leave it for someone else...
  4. gaj,

    you are right, but i was talking about the feature being available in TWS, and also searchable, so I could ask for all trades b/w 11/21/02 & 02/08/03 for instance. On the website, the info is static, so you have to search through your statements for the trades.

    TWS provides a Transaction History just for the current day. Is this the case or am I mistaken?
  5. zxcv1fu


    I cut into any wide spead of option premium & have no problem to get executed most of time.
  6. 1st point - are you saying that until BOX starts, it is not possible for a limit order that is b/w the bid and ask to be executed??

    2nd point - please educate me. thanks.
  7. with IB?
  8. white17


    If you are swing trading why not just keep a spreadsheet open that is a duplicate of 1040 schedule D. Enter your trades as they execute.

    As far as IB having anything to do with whether your order to buy between the B/A: Once you send the order, IB is out of the equation. I find that ISE is the best place to route (only place IMO) if you're trying this. The exception of course is proprietary stuff like OEX &SPX that only trade on CBOE. I find it quite easy to split the spread on OEX.

    Exercising an ITM contract and then selling the underlying; Many brokers will tell you that this creates a short position; It is actually a "short exempt" position and should not be considered net short. IB may have a policy against this but not all brokers do. Shop around if thats what you're looking for. You might try going short FIRST and then exercising the option to cover and see if that works any better. Call IB and talk to them
  9. gaj


    sprob - i don't know RE: tws about the complete listing - i just go to the login part and get a complete list there.

    on the options spread - you can split the bid/ask, but i'm of the belief that you won't always get displayed...depending on the options MM. some are honest, some aren't.

    when BOX goes live, since it's all electronic, it will say "best bid 6.20, i just got a bid at 6.30, i'll display that".

    there are others on here who are much better versed on the option MMs, but needless to say, im' not thrilled with them.
  10. Thanks white.

    I tend do use IB's SMART routing - I wonder if this is the problem?

    Actually, I ALWAYS short (or buy) to lock in my profit BEFORE I exercise an ITM contract. I use IB 'cos they are the cheapest. When I ramp up my volume to 10 contracts then I'll have to seriously consider

    Call IB and talk to them - I have but didn't get much joy. I wonder if Def can help?
    #10     Nov 16, 2003