Yeah, he's been quite silent. I have a hard time believing it fully until he posts some outcome of talks with IB or that he got a lawyer or something. I would have had a lawyer the day it happened. If it happened. I love looking through the NFA database at the lawsuits and fines against firms. No big player has a clean record, everybody gets or sued or fined eventually. Not that I would call IB a big player.
Would be interesting to see if an IB paper account could be used to test the liquidation algorithm. Probably not something people typically do but seeing as how the sim account seems to behave identically to a normal account, I imagine the margin calls work the same way too. Might be deceptively hard to test though. Like a pool shark, losing in a controlled manner often takes more skill than winning. Plus it might behave differently under normal market conditions anyway.
Stefan_777, I think you are misinterpreting IB's margin rules for cash accounts. Take a look at the row for "Short Naked Puts", in the same grid from which you showed us the row for put spreads. Look at the third box in that row, which gives the rule governing Short Naked Puts in a cash account. Notice it says "Put Strike Price" is the margin requirement for a Short Naked Put in a cash account. Nothing suggests that this requirement is limited to European style options, or that Short Naked American style puts are excluded, or that Short Naked physically settled puts are excluded, or that any Short Naked put of any kind is excluded. I have no cash account, so I can't test this, but you can see for yourself in the grid (see third row down, and third column from the left). The grid clearly states that Short Naked Puts are permitted in cash accounts. You believe that American style put spreads are not permitted for cash accounts. Are we to believe that American style naked short puts are permitted in cash accounts, but that, as you assert, American style put spreads are not permitted? This would make no sense. Naked short puts are much more dangerous than put spreads. If American style naked short puts are permitted in cash accounts, then surely also American style put spreads are also permitted in cash accounts. You are simply misinterpreting the margin requirement, which you circled, for put spreads in cash accounts. The meaning of the requirement, which says "Same as Margin Account...Both options must be European style cash settled" means that if a put spread is not European style, or is not cash settled, then IB's margin rules do not recognize the put spread, and the put spread requirement does not apply. Such a situation instead relegates the put spread to be margined according to the sum of the two separate requirements for each of its two legs. These requirements are: for the long put, NONE, and for the short put, the put strike price (the same requirement as for a Short Naked Put, even though it is not naked; it is not naked, but IB's margin rules do not, in such a case, recognize the presence of a put spread, and so they treat the put spread just like a Short Naked Put). Perhaps the OP was allowed to enter the put spread because he met all margin requirements for a Short Naked Put, at the time of entry. Perhaps he incurred subsequent losses on other positions, and liquidated those positions, with the result that his account no longer met the margin requirements for Short Naked Puts in a cash account. Perhaps, minutes later, this triggered auto-liquidation. If all this is true, and if the OP was using a cash account, then he was at least partially at fault for violating margin requirements. Perhaps IB is also partially at fault, for unclear documentation, but not for erroneously choosing to auto-liquidate. If this was a cash account, then it appears the OP violated IB's margin rules, didn't know what he was doing, and shouldn't even have been trading options.
How do you figure? Those were vertical debit spreads so the max possible loss was net premium paid + commissions.
You shouldn't be trading options, because you have no idea what you're talking about. There are no "naked" puts in cash accounts. The requirement for "put strike price" for the cash account means that you have to have a cash balance big enough to cover the put fully in cash in case of assignment by the amount of the strike price. In plain language that means you have to be able to go long in cash when the put is assigned. Effectively making it a cash-covered put, that is not naked. This guy definitely didn't have enough cash to cover the 16 SPY puts he had going (you'd need $182,400 cash). Forget about it! He had a fucking put spread and the put spread margin applies, get with the program already! I can't believe I wasted my time reading your post, it's ridiculous. You've completely ignored the fact you've been debunked by my earlier post. Go away, I'm not going to sit here and teach you options.
This isn't true. If an option spread is American style exercise, and the short leg is assigned prior to expiry, and then the underlying subsequently moves against the long leg before it can also be exercised, then there can be a loss far greater than the premium paid + commissions.
Dude, Please, just check the IB website's grid for U.S. options margin requirements, third row down from the top, third column across from the left, and you will see, with your very own eyes, that Short Naked Puts are permitted in IB cash accounts! Just look at it! If you would just look at it, then you will be in a position to see that everything else you said was incorrect, so that you should unbunch your panties and apologize.
Is it really naked if you have to pay the "put strike price"? Why that would be forking over enough to pay for the stock at that price. Oh my god! Sounds like a cash-secured put to me, who'da thunk it would be in a cash account?! LOL Sit down and think about that for a bit, and maybe pick up a book.
IB allows naked puts in a cash account if you have enough cash to cover it all in case the option is exercise. In a cash account, You cannot use a long put to cover for a short put (eg. long SPY 117 put, short SPY 114 put) if you do not have the free cash of 11400 for each of your 114 put that you write - even the risk is limited. IB bots doesn't know that! Cash accounts do not get margin calls or liquidation bots closing your position. It just disallow you to open the position in the first place if the cash isn't there.
By definition, if you need to cover it completely with cash, it's not a naked put. This is the same mistake the guy above made. Why not? A long put is the right to sell at a given price, if you're assigned, you're forced to buy. Then you exercise the long to sell. It's covered. BTW, you can't use american style options like SPY in a cash account, incase you missed the revelation to off-his-rocker rockford. Right. Why are people even discussing this auto liquidation as being in a cash account is beyond me.