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

Tooth Faerie · 16 July 2018

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 · 16 July 2018

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.

cynic · 16 July 2018

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.

cynic · 16 July 2018

tech/a said:
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 · 16 July 2018

cynic said:
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.

Tooth Faerie · 16 July 2018

tech/a said:
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.

cynic said:
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?

cynic · 16 July 2018

Tooth Faerie said:
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.

Tooth Faerie · 16 July 2018

cynic said:
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.

cutz · 16 July 2018

Tooth Faerie said:
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.

Tooth Faerie · 17 July 2018

cutz said:
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?

cutz · 17 July 2018

Tooth Faerie said:
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.

Gringotts Bank · 17 July 2018

cynic said:
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.

freebird54 · 15 March 2020

In light of recent events IB have changed the rules - see other thread

Tooth Faerie · 21 June 2020

freebird54 said:
In light of recent events IB have changed the rules - see other thread

What was the change?

Can you give me a link to the other thread?

freebird54 · 22 June 2020

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 ;-)

Tooth Faerie · 22 June 2020

freebird54 said:
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.

Dona Ferentes · 22 June 2020

Tooth Faerie said:
Whoa I didn't realise Robinhood is available in Australia.

Didn't think it is

interesting read on robbinghood here:

https://www.firstlinks.com.au/easy-money-download-robinhood-buy-stonks-bro-down

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

Tooth Faerie

tech/a

No Ordinary Duck

cynic

cynic

tech/a

No Ordinary Duck

Tooth Faerie

cynic

Tooth Faerie

cutz

Tooth Faerie

cutz

Gringotts Bank

freebird54

Tooth Faerie

freebird54

Tooth Faerie

Dona Ferentes

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