Australian (ASX) Stock Market Forum

What's it like to get a margin call with Interactive Brokers?

Joined
Dec 8, 2014
Posts
60
Reaction score
0
Hi all, I've been reading a lot about futures and options and I'm waiting to learn more before I dip my toe.

One the things on my mind is what are the mechanics of a margin call on derivatives, specifically with IB.

I'm planning on holding cash and bonds while trading futures/future options.

One question I have on my mind is the difference in trading hours of bond funds and futures, and how this would affect a margin call.

Ideally, I wouldn't want to be sold out of my futures position and want the bonds to be liquidated first. How would this play out since futures trade almost 24 hours and the portfolio is marked to market?

How does one make sure the buffer assets are the one liquidated and not your derivatives?

Thanks in advance
 

tech/a

No Ordinary Duck
Joined
Oct 14, 2004
Posts
19,406
Reaction score
3,637
Firstly don’t get a margin call
Learn how to govern a sustainable
Risk. Have enough funds

In 24 yrs trading I’ve never had a margin call.
Trading stock DAX,FTSE SPI.

Understand how to trade margin on derivatives.
 
Joined
Feb 25, 2011
Posts
5,412
Reaction score
875
I haven't traded with IB, but have traded multiple marked to market instruments, with other brokers. Inappropriate order cancellations and futures positions liquidations did occur on a number of occasions outside of option market hours, primarily due to the optuons prices not reflecting changes in the corresponding futures market. It was terribly inconvenient, very annoying and on one occasion in particular commenced a chain of events that proved quite costly.

So your precautionary approach to this is certainly warranted.
 
Joined
Feb 25, 2011
Posts
5,412
Reaction score
875
Firstly don’t get a margin call
Learn how to govern a sustainable
Risk. Have enough funds

In 24 yrs trading I’ve never had a margin call.
Trading stock DAX,FTSE SPI.

Understand how to trade margin on derivatives.
Try trading correlated instruments, where one of the markets is closed for 2/3 of the day, whilst the other trades continuously, and see how easy it is for a pronounced, outside of hours, move, to temporarily turn your account pear shaped!
 

tech/a

No Ordinary Duck
Joined
Oct 14, 2004
Posts
19,406
Reaction score
3,637
Try trading correlated instruments, where one of the markets is closed for 2/3 of the day, whilst the other trades continuously, and see how easy it is for a pronounced, outside of hours, move, to temporarily turn your account pear shaped!
One of the reasons I trade what I do.
I get enough surprises as it is.
 
Joined
Dec 8, 2014
Posts
60
Reaction score
0
Firstly don’t get a margin call
Learn how to govern a sustainable
Risk. Have enough funds

Understand how to trade margin on derivatives.
Thanks tech/a. I plan on holding enough of a cash and bond buffer to not get a margin call as this is the strategy I have read about but as a cautious person, I always want to be prepared for the worst. I don't want to panic if anything unforseen happens.

I'm also just interested in the mechanics of margin calls of assets doing trade during the same hours.

I haven't traded with IB, but have traded multiple marked to market instruments, with other brokers. Inappropriate order cancellations and futures positions liquidations did occur on a number of occasions outside of option market hours, primarily due to the optuons prices not reflecting changes in the corresponding futures market. It was terribly inconvenient, very annoying and on one occasion in particular commenced a chain of events that proved quite costly.

So your precautionary approach to this is certainly warranted.
Which broker do you use and do you recommend it over IB?

In your case, did the broker just liquidate whichever instrument is open for trading at the time?
 
Joined
Feb 25, 2011
Posts
5,412
Reaction score
875
Thanks tech/a. I plan on holding enough of a cash and bond buffer to not get a margin call as this is the strategy I have read about but as a cautious person, I always want to be prepared for the worst. I don't want to panic if anything unforseen happens.

I'm also just interested in the mechanics of margin calls of assets doing trade during the same hours.



Which broker do you use and do you recommend it over IB?
I have been predominantly trading OTC CFDs with a number of CFD providers, and no longer recommend them to anyone, (largely due to the laxity of Australian regulation, and the problems that typically ensue). I am of the understanding that IB is one of the better brokers to select from and although I have yet to use them, based largely upon their long standing reputation, I am inclined to suggest that you remain with them.
In your case, did the broker just liquidate whichever instrument is open for trading at the time?
Yes! Now I am sure you can imagine the problem this presents, when an almighty outside of hours whipsaw occurs, in the continousoy traded market.
 
Joined
Dec 8, 2014
Posts
60
Reaction score
0
Yes! Now I am sure you can imagine the problem this presents, when an almighty outside of hours whipsaw occurs, in the continousoy traded market.
Wow I'm sorry that happened to you. I hope the damage wasn't something that left your finances in an irrecoverable state.
 
Joined
Aug 10, 2008
Posts
2,052
Reaction score
205
One the things on my mind is what are the mechanics of a margin call on derivatives, specifically with IB.
Hi.

You can select instruments to liquidate last, in the event of a margin call you will receive email notification ( or I take it a pushed message within the app ), then you have a short period of time to close positions to bring margins within limits, if you don't close positions IB will auto close positions as required.

I personally select my options positions to liquidate last and leave my stock positions unchecked.

Highly recommend you don't get into a position where auto liquidation occurs, can get ugly quickly.
 
Joined
Dec 8, 2014
Posts
60
Reaction score
0
Hi.

You can select instruments to liquidate last, in the event of a margin call you will receive email notification ( or I take it a pushed message within the app ), then you have a short period of time to close positions to bring margins within limits, if you don't close positions IB will auto close positions as required.

I personally select my options positions to liquidate last and leave my stock positions unchecked.

Highly recommend you don't get into a position where auto liquidation occurs, can get ugly quickly.
I really don't plan on getting into an auto liquidation situation but I just wanted to prepare for the worst case scenario.

What happens when you get a margin call for futures options when outside stock trading hours?
 
Joined
Aug 10, 2008
Posts
2,052
Reaction score
205
I really don't plan on getting into an auto liquidation situation but I just wanted to prepare for the worst case scenario.

What happens when you get a margin call for futures options when outside stock trading hours?
Assuming the futures options are open for trading, contracts will be closed to bring your account into limits.
 
Joined
Jun 30, 2007
Posts
6,175
Reaction score
615
Try trading correlated instruments, where one of the markets is closed for 2/3 of the day, whilst the other trades continuously, and see how easy it is for a pronounced, outside of hours, move, to temporarily turn your account pear shaped!
Good enough reason to swing trade the night market. Hours are better, big players are on autopilot. Spreads are terrible but that's the trade off.
 
Joined
Jan 28, 2009
Posts
359
Reaction score
15
If I recall it was when the SEGC refused to accept any claims against IB in the BBY debacle - still not resolved. They are now based here but SEGC still will not confirm.
If you have multiple currencies as I have they will take them before stocks
Be wary of SPP I went for the maximum NAB $30,000 and they took all the cash from another currency at the worst rate of the year and of course I only got a small allocation! - Hoped they would only take cash when needed. I think I may try robin Hood ;-)
 
Joined
Dec 8, 2014
Posts
60
Reaction score
0
If I recall it was when the SEGC refused to accept any claims against IB in the BBY debacle - still not resolved. They are now based here but SEGC still will not confirm.
If you have multiple currencies as I have they will take them before stocks
Be wary of SPP I went for the maximum NAB $30,000 and they took all the cash from another currency at the worst rate of the year and of course I only got a small allocation! - Hoped they would only take cash when needed. I think I may try robin Hood ;-)
Whoa I didn't realise Robinhood is available in Australia.
 
Top