Reversing positions in IB - Margin Question

Discussion in 'Order Execution' started by SleepingGiant, May 15, 2006.

  1. ETers,

    Let's say my account has $25,000 in cash which means I have $100,000 in buying power (4 x 25k). I decide to buy 500 shares of an ETF at $140/share and it cost me $70k (so now my buying power is reduced to $30,000).

    Now that I am long this ETF, can I reverse the position (get short 500 shares) by selling 1,000 shares? I guess I am concerned that IB would not let me do this due to insufficient margin (or buying power). After establishing the long position, I would only have 30k in buying power left.

    If the above would not work, what about sending 2 sell orders simultaneously for 500 shares each? The first order would flatten my position in the ETF and the second sell order would establish the new short position. Would this work?

    Any thoughts or suggestions would be very helpful.

  2. I don't know the answer....but why not try it in the papertrading account?
  3. Just enter a limit order, if you don't have enough margin, order will be rejected.
  4. Ebo


    You will not "Free up" the buying power until you actually execute the closing position on any "Retail platforms".

    Some prop firms have software that can detect this and thus not require you to enter two orders. I remember The Hammer did not require two seperate orders to reverse a position.

    The answer my friend, is blowing in the wind.
  5. def

    def Sponsor

    I don't think this is a problem at IB. You can submit the one order, we'll actually split it into two with one being a sell and the other a short sale.
  6. alanm


    The papertrading or demo platforms may not be accurate in this instance.

    It will probably (6:5 :) ) do the right thing.