Fun with IB I know there are some dumb trading decisions in the below post, please refrain from the lectures as I have learnt my lesson. I was short 4 lots of ZW wheat at the close of the day session on Monday, I could see through DOM the were no sellers in the night sesion until the next limit up price (90c) . I saw July (Both contracts had finished limit up) had sellers about 40 cents above the close, I tried entering a buy limit order for the night session of 4 lots in the July contract as some type of hedge to my March short but was rejected due to a lack of margin , I then (stupidly in hindsight) entered a Market order that suprisingly seemed to be accepted.(I honestly didn't expect it to get filled) The night session opens and my March position goes instantly to limit up and is $18000 under water leaving my account in negative balance. Despite this the 4 lots buy order was executed and was quickly up $10000. I tried to close out the July position to take the profit then wait until march came off limit to get out of that hopefully reducing my losses. I was unable to get out of the July position, any size or any order type was rejected due to margin requirements. I called IB and was basically given the "tough luck dude" attitude, there was nothing I or they could do (Why is there no way to add emergency margin in such situations?) until March came off limit up as they had to be closed at the same time with "Spreadtrader" (I didn't enter these positions with Spreadtrader, as far as I was concerned they were completely seperate trades). I was told that the "system" would liquidate the positions as soon as March came off limit due to lack of margin. Well come the morning and suprise suprise the positions were still open and my account balance was pretty much zero, I tried entering orders through Spreadtrader to close the orders but still got the same margin errors. Shortly after the day session started IB of course decides to liquidate them both, at the worst possible time for me. My questions to IB are : What is the exact margin I required to open another 4 lot order in ZW while I had the short 4 lot order still open? If I had the margin why were limit orders rejected but not a market order? I'd like to know my exact amount in my account when the July long 4 lots was executed . My account would have been in negative balance. Why was the July 4 lots long position executed when I had a negative account balance? Why weren't both positions liquidated as soon as the March contract came off limit as promised by the IB representative on the phone? The irony is if IB had been more helpful and I'd been able to close the July position in the night session, then closed the March position in the morning I actually would have made a profit. I have a trouble ticket open with IB (720544) but after 4 days and numerous edits I have had no response and no-one even assigned to it. I'm obviously resigned to the large loss on the March trade but I'm determined to have the July trade busted as it should never have been executed with a negative account balance and with no possibility of it being closed. I'd appreciate some thoughts/advice on where I go next from some of the more mature posters here. Thanks
I can see why they didn't let you liquidate your July. Why should they? What their interest is protecting their ass. What they are confronted with is a guy who is already at a deficit (if I understood correctly), who now wants to liquidate one side of a spread, and "hope" the other side pulls back. Think about it. That creates an additional risk for IB IF the March doesn't pull back. What I don't see is why they let you do the July though if your account was deficit. But why do you care? Didn't you end up making money in the July? Or did it just compound your loss? I don't see where you go here. If you tapped out you tapped out. How is that IBs fault? Learn the lesson. You were bucking the trend in an extremely strong market, with too big of a position for you account. That's the road to wiping your account out, which you discovered. OldTrader
I've been in this situation so perhaps I have a viable answer. Let's say the margin on your short 4 March is 4k per contract. The purchase of 4 July's now lessens your margin. Hence IB's auto-margin has no problem with you belatedly "legging" the spread. Liquidating now though is the opposite ball of wax. By trying to sell July you are now increasing your margin from 4 spreads to 4 outrights. Since you were margin deficient it was a no go. I feel your pain but you don't have a leg to stand on.
I agree with the points you make and appreciate the input. I was a monumentally stupid trade and I understand the mechanics of margin once the July trade was executed. But that's not my argument. My argument is that the July trade should have never have been executed as the March position was instantly to limit up and $18000 under water, leaving no margin to execute the July trade. Also The IB representative on the phone told me that the position would be liquidated as soon as March came off limit. Instead they waited until the morning and my July position had gone from 10000 up to 11000 down. (I was unable to even put any stop or limit orders in) I could have stayed up during the night and closed the positions at much better fills, but instead, unfortunately, I believed what he told me and went to bed. I want an explanation from IB how the July trade was executed, and why the 2 positions weren't liquidated during the night session like I was told they would be. (I'm sure their calls are all recorded)
I agree that the OP has no argument with IB - there were too many bad decisions involved here. However, the short March position is in a market that is limit up against him, which effectively means that his account is worth nothing (at least, that's what it means in this guy's account since, like almost all of these guys, he seems to have taken one position that puts all of his equity at risk). So if we are in a marked-to-market world, his account balance is effectively zero, or their compliance department sure thinks so. From this perspective, he has no equity and so has no margin for 10 shares of AAPL, much less 4 contracts long.
One thing you can be sure of is this. If you screw up your positions and leave yourself open to the possibility that IB can legally take over your accounts and execute trades in them, they will do whatever they can to make money off your mistakes. This shouldn't surprise you, nor should you waste any more of your time trying to get them to admit that they made money off of your mistakes. Their actions are determined by the contract you signed. That is the beginning and the end of it. As you know, this is one of the most cutthroat games in the world. Don't be surprised that a big player acted in a cutthroat manner.
Yes I'm an idiot and I deserve to lose money. I've definitely learnt a big lesson, and I'll be back. But Your second paragraph is exactly my point, My account was worth zero before the July contracts were executed. Before the Monday night session opened limit orders to buy were rejected due to margin, yet a market order went through, this doesn't make sense to me.
Yeah it's a big boys game and I don't like complaining which is why I left it to now to post my story here (I gave IB 4 days to answer my queries) I just want some facts and figures from IB, my exact account size when the July contracts were executed and the exact amount of margin I needed to open the July trade. If they can show me in black in white that their system played by the rules then I'll shut up and concentrate on starting again.
Good luck, I hope you get something out of them. Who knows, maybe if you make enough noise you can get an outcome that's better than the one you're facing now. You're not like most guys in this position who end up here. They're usually blaming everyone except themselves.
Big boys game indeed. I really recommend that most of you guys just take your gambling to the racetrack , where you can control your risk by betting $2 to show on favorites. Nothing personal, but pikers have no business shorting wheat with limited funds , anymore than those scum Hedge funds and banks should be leveraging 100-1 on phantom derivatives. Period.