Was this a vertical spread or a delta hedged position? You haven't told us yet whether your positions in the 114 puts and the 119 puts were equal or whether you were delta hedged (short more of the 114 puts verus your long position in the 119 puts). You simply stated that your long position was hedged with your short position. That can mean a lot of different things. Which was it? If this was a delta neutral trade, that'll go a long way toward explaining why you got liquidated. Still doesn't account for the crappy execution, but thats a risk you run in illiquid markets.
Oh sure. Maybe you can give us the names (or if you'd like, just initials) of some of the high-powered world-class lawyers <i>you</i> work with? Or could you tell us about some of the class-actions you've initiated? Sheesh.
You were not busted - there was no way your hedged debit put spreads incur any margin violation that was not there before. In fact, your put spread would had neted you some nice gains if you were allowed to liquidate them when some order return to the market. It is IB liquidation robots that was screwing up. Have you call them about it? Is IB giving you shares back at the price they liquidated them?
Actually, the OP wrote: He didn't state that he had on a vertical put spread (which would have been easy enough to do). He stated that his long position would move in a dollar for dollar manner with his short position (which a Vertical doesn't do unless very deep ITM or near to expiration and ITM). Hence, the reason I was asking because again in a later post he specifically didn't state that his positions in the long and short puts were identical in size. No worries, I'm not arguing that what IB did was right, I just wanted to make sure that the OP was giving us the full story.
I am pretty surprised so many of you didnt understand IB's liquidation process, there is NO human intervention whatsoever, it's run purely based off an automated engine. atticus if you were talking about my post earlier, it wasnt a hoax, i wish it was. I was short the front month gut and loaded backmonth otm wings at 2x long(if i remember correctly, or maybe 3x) on the es mini options. When the market closed my excess was around 1k for ~$20k position. Then later that night i got the margin emails so logged back into IB, the excess with flipping around between 1k and -1k. I thought about reducing the positions but the bid/ask spread was so wide due to afterhours, didnt think much of it figured will reduce it next morning. Then it started auto selling 1 leg of my wings at market, and it was all over at that point. The excess dropped like a rock into deep red as the position became unbalanced and losing money from the wide spread, and i watched as my whole position was liquidated at market using afterhour spread 1) As i said it was a lesson learnt for me and glad it happened early on, i am well aware of my fault here of overleveraging and not understanding IB's margin call process fully (mainly liquidation still runs in afterhours for futures/options) 2) But at the same time i think IB's liquidation/margin call process is truely shit, any trader who looked at my position would not have liquidated the positions like this to a) further increase my negative excess b) at market order with a 20-30 pt bid/ask. At the minimal it should done a ratio liquidation at market order - covering 1x the short straddle All i am saying is i wish this thread existed when i first started using IB it would saved me some money. Btw found out later there is a way you can manage the liquidation somewhat by telling the liquidation engine which position to sell first, it's bured in the tws' menus, google it. If you dont set that, it will just randomly liquidate. That was the surprise - IB is completely automated liquidation engine, you are on your own there is NO human. Came from my previous broker, where a vp would look at my position then email/call me on his suggestions when there is a margin issue, then we would work something out, it was quite a shock switching to IB's auto liquidation process. anyway i wish there is a better broker out there, but there are none that can match IB's functionalities and products, so yeah i am still using it....
From earlier in the thread: "My positions in my account were: - x amount of June SPY 119 long puts - x amount of June SPY 114 short puts - y amount of May USO 40 long puts - y amount of May USO 37 short puts - cash" Vertical spreads. OP provided enough information for IB to deny this story - if it isn't factual.
If I develop a fully automated system that stole money from bank accounts, would the account holders be on their own? Of course not. I'd be responsible for the system I set up. IB is responsible for their systems as well. They can't liquidate a cash covered debit spread to create a loss in an otherwise profitable account, whether it be done by human or machine, it's still wrong and deserves to be reversed at IB's expense.
I've had plenty of auto-liquidations from IB. They are amazing to watch. But usually I got them when I violated overnight margin on a bunch of autotraded stocks. Most of the time these were profitable trades because I can often catch trades near the low, or at least a little lower than the close. Some days I got hammered of course... But if you look on your accnt page you can check the "Liquidate Last" box for securities that you REALLY need to keep. I use it for protective futures and put hedges, just in case my autosystems overleverage a bit.
I have never had an account at IB. With that said, if the IB auto-liquidation engine is indeed fully automated with no human intervention, it stands to reason that even .01 bids on a $40 stock will be assumed to be accurate and the engine will act on those bids. Clearly the IB auto-liquidation engine is designed to do one thing and one thing only - to protect the financial interests of IB and only IB. It sounds like if an IB customer got screwed by the auto-liquidation engine, the customer's only recourse is to go to arbitration. (My guess is that most customers will never do that and maybe IB will lose a few customers in the process, so all in all the auto-liquidation engine is doing its' job correctly (protecting IB's interests. The customer's interest is really irrelevant.)) That's my read of this situation....