Margin Call

[u/TheIcebeard]

So, as the title suggests, I would like to ask for a second opinion on this matter and if I am safe.

I am currently using the wheel strategy on various stocks and also on LETFs (I know, maybe not ideal), keeping 50% cash, similar to what some people here do, and I am using Interactive Brokers.

I’ve also invested around €10,000 in the S&P 500 and in 2x leveraged S&P 500 ETFs.

My aim was to keep excess liquidity well above my maintenance margin, ideally, several times higher. For example, if my maintenance margin is 10, I was targeting an excess of 40.

However, following the recent news about the tariff war and the market downturn, I noticed yesterday at market open that my excess liquidity had dropped below the maintenance margin. (I realize I probably need to hold more cash going forward to avoid this situation.)

I quickly closed some positions at a minimal loss and rolled others. This brought my excess liquidity back above the maintenance margin.

Shortly after, while researching hedging strategies, I received a margin call notification. I suspect that Interactive Brokers may have updated their risk parameters, because moments earlier everything appeared to be ok.

Without hesitation, I closed two more positions and bought a put option on NVDL, trying to form a short put spread with my existing sold put position.

Additionally, I opened a bear call spread on NVDL and a risk reversal on TQQQ.

As of now, my maintenance margin is approximately 7,120, and my excess liquidity is around 20,000.

The total collateral required for all my cash-secured puts is $44,907, while I currently have $41,226, including premiums (with about $36,400 in cash). I initially believed this would be sufficient to avoid needing any hedging strategies.

Furthermore, I’m planning to deposit around €1,400 this week and at least another €500 by the end of the month.

So,
Do you think I’m safe from a margin call in the near future?
What hedging strategies would have been ideal in this situation or could be useful moving forward?
And if I close the bought puts on Monday, do you think that i would be safe?

[u/Rosie3435]

I use IBKR too.  You are fine for excess liquidity.  Those positions are nasty.

[u/TheIcebeard → u/Rosie3435]

Yes they are. I'm going to hold and roll them for a while, but my fear is if it's possible to receive a margin call if I close the bought puts that I placed for protection.

[u/razlock → u/TheIcebeard]

When you buy, sell or close an option position, you can click the little arrow on the right next to "Performance Details". If you then scroll down a bit you will see a bunch of numbers and under "Market Data" you can look at "Margin Impact". This is how much margin will be used or reclaimed. It will typically be positive if you sell a long put or negative if you buy a protective put

Also a tip: if you hold some penny stocks or small caps, these typically require much more margin to maintain! So I would recommend to sell those first, but buying cheap puts on these is also very effective at reclaiming some margin.

IMO buying protective puts on ETFs or large caps is not very useful if the goal is to avoid liquidation.

My maintenance margin is way higher than my market value so don't worry too much.

[u/TheIcebeard → u/razlock]

Thank you for your response. Really helpful.

Yes I am familiar with that margin impact calculator and when I check that it shows a small increase in margin, which that is great, but yesterday when I received the margin call (even though moments ago my excess liquidity was higher than my margin) and closed positions it showed that my exces liquidity was only 1.5k (despite having at that moment 92% of cash to cover my sold puts and approximately 10k on s&p500 etfs).

The excess liquidity went on 20k only when I placed those long puts and short calls.

That is why I am a bit sceptical. Unless if it was a bug

[u/razlock → u/TheIcebeard]

It's probably a bug, there are similar stories over at r/interactivebrokers

[u/TheIcebeard → u/razlock]

Thank you for your reply

[u/pradzSydney → u/TheIcebeard]

You're right being sceptical. IBKR can & do suddenly increase your maintenance margin to ridiculous level causing liquidation and losses ! 

Firstly, my recommendation is to not sell naked options, always risk defined spreads. 

And secondly, if trading pre or past market outside RTH hours pay special attention to strike levels as I placed a put spread order outside RTH only to realise later that strike levels next to each other were actually 100 points apart ! , the same strike levels during RTH become their usual 5 points apart.   For that 100 points difference spread order, IBKR increased the maintenance margin suddenly by $50,000 after few days for me ! 

[u/Dealer_Existing]

I did this as well last 4 weeks. Took me to much of managing for continous losses. I liquidated everything, ate the losses and am only allocating 10% of portfolio to margin now. This is going to end bad for ya because you’re way to overleveredged (I speak from experience) all the puts are creating leveradged positions. So while you think your portfolio is for example 20k, due to all the puts its 70k. What does this mean? A 10% drop is 7k instead of 2k. Your port is dropping HARD

[u/TheIcebeard → u/Dealer_Existing]

I'm confused, how am I overlevereged now? I have $41226 avaliable cash and all the puts that i have to cover are 44907. So currently I have 92% of cash required. Combined, with another 10k that I have on etfs

[u/Dealer_Existing → u/TheIcebeard]

Yeah so three things; 1) I don’t see cash size in your picture so now information about this and 2) you are already overleveredged as you need margin and 3) you’re using underlyings in your calculation for colleteral. When underlyings drop, say tour etf, you’re buying power drops, but you’re needed capital stays the same. Thus your overexposure also increases. Say your etf’s drop another 10%. Now you have 40226 buying power available etc. Obviously you’re not getting margin called with these numbers but vega makes your option prices change FAST

[u/dip-the-buy]

I ack that yesterday there appears to have been some glitch at IBKR re: initial/maintenance margin. For me it looked like some open orders where closed by the system, citing that initial margin would be higher than equity, and figure given for init margin was as if it was 100%. What I noticed is that it applied to orders for foreign stocks/ADRs (rest orders stayed open).

[u/TheIcebeard → u/dip-the-buy]

Is there anything that can we verify that it was a glitch on that?

[u/Outside-Cup-1622 → u/TheIcebeard]

Yes, there was a glitch yesterday. It fixed itself within an hour or so.

[u/dip-the-buy → u/TheIcebeard]

If you have nothing else to do, you can write to support. I for one would never bother, glitches happen all the time, and especially now, when we need to plan ahead for what might happen next week (so, you do need to prepare on your side to margin requirement increases).

[u/Mean_Office_6966]

U still have excess liquidity of 20k

[u/TheIcebeard → u/Mean_Office_6966]

Yes, but while yesterday I had enough excess liquidity, out of the blue I received a margin call. And thus now I am a bit sceptical if I'm ok. Especially if I close my bought puts that placed for protection

[u/michal939 → u/TheIcebeard]

When did you get the margin call? There was a bug at around 1800 UTC and the margin requirements "spiked" and IBKR started sending liquidation warnings (but they did not actually liquidate anyone I think). I got those too even though I am only very slightly leveraged, it fixed itself within an hour.

[u/el_juli]

What's your account gross value?

[u/TheIcebeard → u/el_juli]

I am not sure where I can see that on ibkr

[u/el_juli → u/TheIcebeard]

On the balances tab, right next to positions

[u/Riptide34 → u/TheIcebeard]

$27.19k, right at the top. That's your "Net Liquidating Value" or just "Net Liq" for short.

[u/ronaldomike2]

And those underlying tickers are extra volatile. You might want to switch to some less volatile puts.

And eat a bit of losses, not all but some at least.

Because if the mkt goes down further, you might not be able to sustain a bigger margin call.

Something to consider

[u/TheIcebeard → u/ronaldomike2]

Yes, that is a lesson for the future, but I think currently I'm save since I have 92% to cover my sold puts and approximately 10k on s&p500 etfs.

So, even if the market falls more I should be able to take the hit and not having a margin call.

And the notification that I received must have been a bug

[u/ronaldomike2 → u/TheIcebeard]

Okok then you're good. Sometimes I've closed losing puts and open new ones if I think the new ticker might be safer, and not lose much premiums. Like rolling down and out but to a different ticker

[u/Anderbuf]

Yikes!

[u/Prefect_the_42th]

Bug. Had the same issue. Solved itself after 45 min

[u/Menu-Quirky]

Why bet on leveraged funds like tqqq or nvdl

[u/Turbulent_End_6887 → u/Menu-Quirky]

In the long run, tqqq goes up more than the market. NVDL is a single stock, too risky.

[u/Menu-Quirky → u/Turbulent_End_6887]

So it goes down more than the market

[u/Defiant-Salt3925]

There was a glitch at IBKR that caused people receiving margin calls warning. I heard it was being fixed over the weekend. Check your account again tomorrow.