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After August 19, IB will increase margin requirements for volatility products because of the current Vix level has reached all time low.
Some questions that I have in here.
Does anyone know how is different between the current margin and the new margin?
Is writing Option for volatility products require higher margin than buying volatility products?
What will you do after IB imply this new margin requirements? I think, my common sense to reduce exposure from margin requirements is to lower scale. Any other solution?
What I found from C2 regarding margin requirements to allow the developer do trade is not same with IB.
For example,
1.even though the model has TOS 100% but the actual the developerâs NAV is higher than the NAV shows at C2
2. In worst example, a developer still can do trade eventhough the current NAV is below zero. Alpha n Omega
3. The developer is using a different broker ( not IB), therefore, eventhough the subscriber has the same NAV with the developer n using 100% scale, the subscriber may not allow to do Trade the same size bcs of margin issue.
C2 shows number of NAVs for subs. Typical commission NAV is deep below zero for A&O, but IB fees NAV is around +1-2k. In addition looks like developerâs NAV is raw equity values not affected by fees. So A&O now has 35k in cash and still can trade.
How about this models.
Mcprotrader
Volatility ETF Trader
Janâs Option Writing
Smart Volatility Short
Those volatility models perform outstanding results, but now, IB will increase margin. Let say, if a subscriber is using 100 scales and has the same NAV for each models that shows from C2, will be any issue with the contracts size ? Especially C2 has different margin calculation with IB
One (complex) way I can see is to check list of trades, try to estimate margin required by IB per trade, sum these margins in case of number of trades open at the same time and compare with your capital. Another (simple) way is just scale down proportionally to IB margin increase.
Itâs always amazed me how much margin Interactive Brokers has allowed for volatility ETPs, so Iâm not surprised to see this adjustment. I spent some time over the weekend working with IBâs Risk Navigator using the âNew Margin Requirementsâ setting to understand the impacts of these changes. My Smart Volatility Short strategy mirrors my own IB Margin account, so both my own account and the strategy will be adjusted to meet the new requirements.
Iâve never come close to using all the margin available, so for my strategies, there wonât be too much impact. The main adjustments will likely be: a reduced TMV holding, more use of short VXX, less use of short TVIX, and a lower âmaximum exposureâ. No adjustment to scaling will be needed for my strategies.
Based on IBâs Risk Navigator, it looks like the new margin requirements will be as follows:
60% for âregularâ volatility ETPs like VXX and VIXY
60% for âinverseâ volatility ETPs like XIV and SVXY
120% for âleveragedâ volatility ETPs like TVIX and UVXY.
These are different than the new margin requirements sent out by C2 over the weekend, and Iâve got a message out to them to clarify.
Btw, if you use the same amount NAV with your strategies and use100 scale for Option model such as Janâs Option Writing and Mcprotrader, Those models are out business because of margin issue. Your IB will force to close your positions.
Janâs Option writing is 100% TOS.
Well I trade a $ 25.000 with the Volatility ETF Trader and received margin calls up to $ 60.000 âŚI really do not understand the concept! IB increased the margin but almost 3 times more money needed to trade the strategy is quite confusing and puts a question mark behind all figures reportedâŚI also wrote email to C2 yesterday but still waiting for an answerâŚ
Do you mind to share what is your positions, the quantity , what price n also what is the instruments? May be someone who is professional in this field can explain more details
What I remember, before I left from that model with 100%, this model is using high margin. With the capital $50 k, the developer is using margin with almost similar value that it shows NAV at C2. Basically, with that capital $ 50k, you trade more than $100K because u are using margin. Unfortunately , IB increased the margin requirements n u received margin call.
Increase high margin requirements, lower buying power and high volatility against ur positions are recipe of disaster.
When u have margin call, most likely IB liquid ur positions. Am I correct?
I just got off the phone with Interactive Brokers. They indicated that the Risk Navigator may not be working correctly, so tread cautiously when using it. They also confirmed the following new Initial Margin Requirements:
Long SVXY or XIV: 100%
Short VXX or VIXY: 150%
Short UVXY or TVIX: 300%
And at the end of the week, the Maintenance Margins Requirements on the above will all increase to match the Initial Margins.
These new margin requirements are 5 times what they were 2 weeks ago, and basically eliminate any leverage advantage over a cash account.
So, for any TOS volatility strategies, if they are currently over these requirements, by Monday they will need to be in line. I assume C2 will adjust the margin requirements for non-TOS volatility strategies too, but I havenât heard that yet. So, until C2 lets us know, if youâre following a non-TOS volatility strategy, you should find out what the strategy owner is planning and adjust your scaling accordingly to avoid margin calls.
This is an automated message from Collective2 in regards to your Autotraded account UXXX12917.
The order below has been rejected by your broker with the reason âInsufficient margin (YOUR ORDER IS NOT ACCEPTED. IN ORDER TO OBTAIN THE DESIRED POSITION YOUR PREVIOUS DAY EQUITY WITH LOAN VALUE [47469.14 EUR] MUST EXCEED THE INITIAL MARGIN [49796.44 EUR])â. This usually means there is not enough money in your account to execute the order below.
Later on after transferring another Euro 10.000
"Insufficient margin (YOUR ORDER IS NOT ACCEPTED. IN ORDER TO OBTAIN THE DESIRED POSITION YOUR PREVIOUS DAY EQUITY WITH LOAN VALUE [47941.91 EUR] MUST EXCEED THE INITIAL MARGIN [57569.15 EUR])ââ
Ib didnât liquidate any position because I was liquid but they didnât allow me to add position because of the higher initial margins!
I am just wondering if I am the only only facing this problem with IB and with this strategy!
This is because right now C2 is still using the old Initial Margin Requirements which do not match what Interactive Brokers is using. So, if a strategy is not TOS, it can add to its volatility position way beyond what will actually be allowed in anyoneâs IB account - they will be able to place the trade on C2, but it will get rejected by IB for its followers. TOS strategies are forced to stay within IBâs (or whatever broker they are using) margin requirements, and therefore those should not present an execution problem. Iâm still waiting to to hear from C2 about how they will deal with the new margin requirements.
I totally agree otherwise it does not make any sense to offer such a strategy in such a platform where you should actually follow the strategy with no stress but since I subscribed it I am constantly involved in it!
I also wait for responses from C2. There are really quick in sending text snippets but do not really answer the questions and what is even more annoying is the timelag of the responses. On an important issue like tradability of a strategy getting one answer a day is just not appropriate.
âWhile IB did increase the maintenance margin requirement for volatility products on 08/19/17, the initial margin multiplier was removed and a rules vs risk based margin system was added. Currently, the initial margin requirement for volatility products is being calculated as the greater of the rules based or risk based requirement. This calculation has had the effect of reducing the previous increased Initial Margin Requirements.â
This reminds me of the time when the âUltra Ultraâ ETFs (the 3x) kept having their margin rules tweaked, I didnât trade those nor do I trade the volatility ETFs/ETNs, but I can see where it would be maddening while they keep messing with it. There is the additional thought that if (when) SHTF who knows what kind of margin changes may occur at the worst possible moment on these products, hence why I think everyone should be hedging with tail options like you doâŚ
It seems Interactive Brokers has again increased their margin for XIV. It seems the margin requirement is 100% now! Does anyone know if it is the same with portfolio margin accounts?
