IB is shooting itself in the foot by failing to publicize the following. IB is making markets in EFPs, and allowing its customers to do so as well, thru its own internal ECN book devoted especially to EFPs. It is called IBEFP. IB usually maintains spreads on this ECN which are far narrower than the spreads one would have to pay by entering each leg of an EFP separately. Separately legging into an EFP would require one to pay the spread on an SSF, which would be very expensive. IBEFP replaces that mile-wide spread with a far narrower spread made by IB, and sometimes, narrowed even more by IB customers. Conversions were previously superior to EFPs, for purposes of collecting interest or other financing needs, because of the smaller spread costs; but now, thanks to IBEFP, spreads are smaller for EFPs than for conversions. Commissions are also much smaller. Another advantage of EFPs is that they eliminate the risk of early assignment created by the short call in a conversion. Early assignment can leave the remaining long put and long stock legs incompletely hedged and this can result in losses.
An easier way to solve this: IB pay interest on the first 10k in an account. I've been using IB for just over 5 years now and I'm still hoping they will start paying interest. However I will not complain as I save a ton of money on commissions more than if I switched to another broker. Also, I've had 2 problems with their technology (both minor) and they helped me clear them up both times.
Spot: $47.54 close Forward based on 5-months at 5.38% 6mo LIBOR; $48.61; premium, $1.07 Dec 48C: 2.77 Dec 48P: 2.16 C/P: .61 Strike/spot: .46 Conversion capture: $1.07 Voila. 5.38% I understand the dividend is priced in the options. So the question is should the net return be -$47.54 (Paying for the stock) +$2.77 (selling the call) -$2.16 (buying the put) + Net difference between strike and price bought +$X of dividend? When the board give you a dividend in Sep or Oct and you banked it. No one will take away your dividend when the options expired, will it?
Regarding the dividends - this might help http://www.interactivebrokers.com/en/trading/pdfhighlights/PDF-ExchPhysical.php
obviously you are the joke because you don't know what you are doing. You should forget about trading, forget about starting threads with titles like "Sorry IB, your customer service is a joke", and start going through the webinars here: http://www.interactivebrokers.com/en/general/education/webinars.php?ib_entity=llc
The dividend discounts the forward price at expiration, effectively reducing the yield on the conversion. This discounted-yield is recovered by the long spot dividend capture. Suppose a dime in dividends through expiration -- you're selling the synthetic a dime under the fairval based upon the LIBOR rate. This dime is recovered through dividend payments, as you're a shareholder. Zero-sum transaction.
Again, for the sake of honesty, I'd like to point out that I've been getting help from an IB representative via PM and he could reproduce the bug on his computer You can try reproducing it too: -Open a market scanner page, and go to US EFP - Change the price to "raw price" (not interest %) - Highlight an EFP - Click "Order" in the upper left corner and submit the order - I use version 873.3 (the latest) You will see the market scanner grid turn purple, everything freezes for a second and then a window saying "Logging in.." pops up You might also get strange commissions (x3 or x4 in my case) Apparently, adding the EFP manually to another page solves the bug and you can submit the order with the correct commissions