Interactive Brokers Incorrect Option Margin Requirements

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Interactive Brokers is one of the largest online discount brokers in the world. They average over 1, client trades every trading day and offer an incredibly wide array of products to trade. A lot of professional traders, hedge funds, and other institutions choose Interactive Brokers as their broker for stocks, options, futures, and forex in the US and abroad. We can see why. On the surface, Interactive Brokers looks like a great choice.

They have very cheap commissions and offer access to products that other brokers do not, like US dollar futures that trade on the Mexican Derivatives exchange or options on Euro-Bund futures. For one, IB charges for order cancelations.

The exact pricing structure for canceling orders is opaque and not easy to understand. Order cancellation fees are off-set be executed trades, but the problem occurs when total cancelled orders exceed the number of executed orders for the day.

Very few brokers charge for oder cancelation, and IB is one of them. At The Options Bro, we like to put on a lot of futures positions and short options positions, and IB was not happy with this. IB is not paying employees to actively look at the risk of all of their client accounts. Instead, they have an algorithm that determines the daily exposure fee pricing and charges clients accordingly. We held this exact same position with three different brokers and there was no problem with the margin risk team at all — IB was the only brokerage firm that gave us a hassle.

We this said, we had an account with Interactive Brokers for approximately three months, and it was the worst three months of our lives — seriously. Not only were we charged a bundle of stupid fees, but we also brokers account margin requirements for option interactive several of our positions brokers account margin requirements for option interactive that resulted in moderate losses.

In one instance, we had too many futures positions in our account, and our margin buying power temporarily went negative due to futures exchanges raising the margin requirements for their products. IB did not provide us this courtesy. This causes more forced selling and an eventual account blow up. Options spreads can often be very wide for a number of reasons.

Plus, if you think the daily exposure fee for out short futures position is a gyp, the daily exposure fee for short options positions is ever worse, because the theoretical losses are much greater — if not unlimited. Our aim is not to speak negatively of Interactive Brokers. Rather, we are merely trying to state the facts and expose the truth. And in this case, brokers account margin requirements for option interactive truth is that Interactive Brokers is simply a bad choice of options and futures traders.

Options Bro December 13, Auto-Liquidating High-Risk Futures Positions We this said, we had an account with Interactive Brokers for approximately brokers account margin requirements for option interactive months, and it was the worst three months of our lives — seriously. Options Trading Nightmare We were certainly not the first IB clients to have issues with auto-liquidation algorithms. Short Options Positions with Interactive Brokers Options spreads can often be very wide for a number of reasons.

Final Thoughts Our aim is not to speak negatively of Interactive Brokers.

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Join our FREE member web site. Estimate margin required for selling naked options. I use the formula at Interactive Brokers to estimate your margin. There are two numbers calculated: This is what you have to keep in your brokerage account. This is your net cash requirement. Capital Discussions, LLC engages in trader education and training. Capital Discussions, LLC offers a number of products and services via the internet at capitaldiscussions.

Capital Discussions, LLC offers web-based, interactive training courses on demand. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities. You shall be fully responsible for any investment decision you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs. Options involve risks and are not suitable for all investors.

Prior to buying or selling an option, you must receive a copy of Characteristics and Risks of Standardized Options. The information on this web site is provided solely for general education and information purposes. No statement should be construed as a recommendation to buy or sell a security or to provide investment advice. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances.

Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs. Supporting documentation for any claims, comparisons, statistics or other technical data in this presentation is available at Capital Discussions, LLC info capitaldiscussions. Past performance is not indicative of future results. Parameters relating to past performance of strategies discussed are not capable of being duplicated.

In order to simplify the computations, slippage, commissions, fees, margin interest and taxes are not included in the examples used on this web site. These costs will impact the outcome of all stock and options transactions and must be considered prior to entering into any transactions.

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