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Simualted margin calls


#1

I have two strategies that have been getting simulated margin calls and closing positions, even though my trades don’t use margin.

These have force-closed my positions and cost me and my subs tens of thousands of dollars. I also have a strategy that is reporting -10% for the month of March even though C2 is reporting no trades for the month.

I can’t get any explanation and have no idea why there are so many bugs lately. Anyone have any insight???


#2

Hi @Jay_Wolberg, you need to be more specific like which strategy, instrument and what day/time you are getting the margin calls in order for someone to help you.

Also, I am pretty sure that any trades executed will require margin (cash) since you can’t trade with unlimited contracts/shares etc. as each product will have their own specifications.

Are you aware of the margins for the products/instruments you are trading?

Hope this helps.


#3

Hi, Jay -

We’re looking into this. We’ll communicate via the help desk.


#4

Interesting. I was always thinking that C2 auto-generated margin call is more informational then real thing. I’ve seen it several times on futures systems but didn’t notice any influence on open positions.


#5

the system sold all my VXX position because of this “fake” signal and of course it was sold at the worst momento, when it was very down.
How are you planning to solve this situation C2?


#6

Jay will re-open the position.


#7

I have the same problem reported earlier with a wrong simulated margin call alert stating that the current open positions will be closed at 13:16 (Eastern USA).

The system is: https://collective2.com/details/114870486

I have sent also an email to the technical support but just in case…

THX!


#8

I also received “margin calls” for several strategies even though my positions are always fully backed by cash (there is no margin to call away). This is a serious issue. I’ve spoken with the help desk several times about this…each time telling me that I should just reduce my positions. A position that is fully backed by cash should not have to worry about margin calls. If this issue is not resolved, the C2 platform is seriously flawed to the point of being unusable.


#9

Here’s the explanation I received from Matt. It makes mathematical sense, but the term “margin call” is a misnomer.


#10

Jay, could you repeat what Matt said? it didn’t seem to come through with your post.


#11

Your “remaining account value” must always be greater than zero, or you will have a margin call.

It is calculated (for stocks) as:

remaining account value
= beginning cash - [ shares_purchased * purchase_price * allowedMarginRate ] +/- open_position_gain_loss

where:

allowedMarginRate is typically 50%
but for some symbols (such as VXX) is now 100%).


#12

Thanks, Jay.

The formula doesn’t make sense to me. Let’s say I have a $10,000 account and buy 100 shares of a $100 stock (the purchase of 100 shares is fully back by cash so no margin is used). If the price of the stock drops to $90, my account drops to $9,000, but the position is still fully backed by cash (it only takes $9,000 to purchase 100 shares of a stock trading at $90). According to C2, however, I could face a “margin call” because of the “open_position_loss”, which doesn’t make sense. What am I missing?


#13

if you used it like the previous example. then your would be in 100% and face margin call due to commission


#14

VIXStrategies is right. For stocks, unless broker does something strange, when you have margin account and exposure lower of 2 : 1 will not result in margin call.

So in his case there is no reason for margin call.


#15

DataAlgo - for sake of argument, ignore commissions.

Let’s simplify this even further - if you’re not using margin (positions are fully backed by cash), how could you possibly face a margin call?


#16

As I mentioned, margin call as it is used on C2 is a misnomer. While a better term could be used, it’s largely irrelevant. The system constraints are defined by the math given.


#17

Thanks, and totally understand, Jay. My comments/questions are directed at C2.

Matthew Klein - can you comment on why your “margin call” formula is the way it is, rather than operating by standard margin call procedures?


#18

I understand your point. The best I can say is that C2’s method for handling liquidity constraints in a “C2 Model Account” is a first-order approximation of the real world. (In many ways it is more conservative than what most brokers allow.)

As to where the math comes from: the rules were created as a way to allow multi-asset margining from one pool of capital. It’s true – C2’s calculations are not exactly the way the real world works, but C2 does mirror the real world up to a point (for example: if you hold a stock position, and the stock loses anything less than 50% of its value, C2 looks a lot like the real world. If your position loses more than 50% of its value, C2 becomes more conservative than a real-world cash-account brokerage).

No, it’s not perfect, but my hope is that C2 Trade Leaders will try to work within the constraints as best as they are able.


#19

Fair enough. Appreciate the reply. Have a great weekend.