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Hi all,
Sorry this is a very basic question, but it confused me for a while. I had a margin account with Interactive Broker, and I used to buy stock n option. If I deposit 50k into the account, I get 200k buying power. Does that mean that I can subscribe multiple strategies with total value up to 200k? How about if the strategy trades both stock/option/future and has different margin policy?
Thank you for anyone who clarify it.
Best,
Jin
Technically yes, but you pay interest and if your positions drops alittle bit, you may get a margin call and be be forced to sell. Would I use the 200k, NO
Margin is leverage. Leverage goes both ways, especially in futures, where leverage sometimes can be 1:260 ($500 can get you into a contract worth $130,000).
And answering your question: technically yes. IB also has an option for portfolio margin, where your existing positions can act as a collateral as well, thus increasing your leverage. But futures have different margin requirements (day vs overnight), as well as stocks sometimes can get increased leverage requirement (when IB started to increase margin requirements for volatility based stocks).
So it is not that straightforward.
I would advice not to rely on leverage, unless you are experienced trader.
Be careful here. The 4X margin for stocks is at 25% for initial margin and for maintenance margin and is for DAY trading only and if you are over 2X at the end of the day you will get a margin call. Reg T end of Day Initial Margin is at 50% or 2X.
Margin is different as well for some volatile symbols and for some ETF’s. It can be as high as 100% or 1X. In other words, it is considered a cash purchase at 1X.
In principle, though, you are correct. You can trade a strategy at higher scaling to use more than your initial capital you just need to always know the requirements for the equities or instruments the strategy is trading. You will also need to check with the strategy leader to see if leverage is already being used within the strategy so you are not trading beyond the margin available in your brokerage account.
Here is a link regarding margin for stocks at IB: https://www.interactivebrokers.com/en/index.php?f=26658&hm=us&ex=us&rgt=1&rsk=0&pm=1&ot=0&rst=1|0|1|0|1|0|1|0|0|1|0|0|1|0|1|0|1|0|0|0|1|0|0|0|1|0|0|0|0|0|0|1|0|0|0|1
Thank you very much for these useful information !
