Possible to open new position with existing positions >maint margin but <RegT initial? At IB.

Discussion in 'Risk Management' started by SVP_of_Fund_Pyrotechnics, Sep 26, 2020.

  1. I'm really confused by the wording of things I've read on IB's site regarding their policies for RegT margin accounts. I'll provide an example scenario below to illustrate this.

    Day 1: Open IBKR account with RegT margin enabled. Deposit $50K cash (just assume this "Day 1" is when this cash deposit fully settles w/ no restrictions).

    Day 2: Purchase 80 shares of stock XYZ trading at $1000/share for a grand total value of $80K. $50K my money + $30K loan equaling a 62.5% margin, price doesn't move, at close 62.5% > 50% initial overnight margin requirement.

    Days go by with various market fluctuations.... XYZ has some bad news, stock drops 37.5% to $625/share and a total position value of $50K ($20K equity + $30K loan). Margin is now 40% ($20K equity/$50K gross position call). No liquidation because XYZ has a 25% maintenance margin.

    Day 15: Get a trade idea for stock UVW, attempt to purchase 50 shares trading at $100 for a total value of $5K. Intention is to hold both XYZ and UVW positions for multiple days further.

    So, at IB, is the UVW trade accepted because the account will still be above maintenance margin for the older XYZ position or is it rejected because IB doesn't let you do that?

    I'm not at all saying any of this is something I would do or intend to do. I used to have a RegT account at Fidelity that I'd use margin on for a few days here and there. I never was in a situation where my account was above the maintenance margin level but not 50% and wanted to open a new position but I did play around with their margin calculator a lot and I could have sworn the example scenario I've just given would have been acceptable (but I may be remembering incorrectly). Basically what I think I remember, and how I think about it in my head, was it would drop the equity % on the older position enough to pass the initial margin check on the new, UVW, trade.

    From what I've read on IB, I think they would reject the UVW trade or allow it based on intraday margin but would liquidate me upon doing the overnight check.

    I would appreciate any explanation or guidance on this question/scenario, and I'm curious if this sort of policy is somewhat unique to IB in terms of RegT margin accounts... Or maybe I'm just not remembering correctly how the rules were implemented at Fidelity.
    murray t turtle likes this.
  2. longshort


    Forget about maintenance margin for opening trades, it really only matters to avoid being liquidated once you have the trades on. Initial margin over all positions, existing and new, is always required to open trades. So the answer to your thread title is no, you need sufficient initial margin over everything.
  3. %%
    Several ways to solve that problem;
    learn to take profits or sometimes cut loss,weekly/more or less. IF they ever do a forced sale/remember the terrible fill you got + my words...………………………………………………………………………………………………..
    37% drop?? Plenty of single stocks + ETFs go down 50% or more. [I hate the way stuff sometimes turns around after we exit it/but cant forsake respecting risk/plan because of that]