Volatility Product Margin Increase

Other than interactive broker. Which c2 has the biggest tie and partnership with. All other broker still in reg t or 100% margin on uvxy/Tvix and 50% or 60% on vxx/svxy/xiv

I need to abandon the TOS badge on c2 and move my account to scottrade or a new broker.

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You want a broker who is actively modeling their exposure to the type of risks associated with these products and adjusting their margin such that their responsible client-base will not be negatively impacted by a blow-up event.

Beware the brokers who arenā€™t doing this because if something happens you might find yourself being impacted even though you werenā€™t engaging in excessive risk-taking, depending on account size the impact could be very very negative, should something go wrong.

IB is a large public institution with large re-insurers looking very hard at their operations continuously, if they are tightening risk controls beyond regulatory minimums I would be paying attention and as a client I consider it ā€œa good thingā€ā€¦

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Very well said.

I think IBā€™s margin increase should be a wake up call for all volatility traders, especially for those who trade volatility systems which are not hedged.

Interactive confirmed with me today that their ā€œavailable for tradingā€ metrics on the dashboard are not correct when trading volatility instrumentsā€¦ at least right now. If you trade a large enough account, nimbly - then these issues are hardly noticeable, but if maintaining margin is a major part of your edge, then these matters are a big deal. IMO only - but in this market, I will not feel comfortable with any naked risk on volatility products until the VIX is trading steadily back above $10ā€¦

Fidelity also is not calculating margin correctly at this time when it comes to volatility products. The risk navigators, all these tools you use at the brokers, they do not work right now. If you are trading volatility you need to remain covered and completely neurotic about hedging the risk. Personally, I am just dual hedging everything. While this is all complicated, the truth is that there is also major opportunity here at the moment.

The last time when IB increased margin on volatility products this happened: nothing.

There can be many reasons why IB is increasing margin on volatility but they still donĀ“t have the crystal ball. ItĀ“s very possible that they just have a high client exposure to short volatility so they want to keep that at bay just to protect themselfes for the worst case.

That doesnĀ“t mean a volatility spike must happen any time soon!
So donĀ“t be fooled, just stay rational and observe the marketā€¦ No signs of a major correction yet.

Have a nice day,
Alex

Wellā€¦ just based on common principle you are correct. Too many people are talking about this tradeā€¦ so, what is likely to happen - VIX continues to slip lower, people forget, and then one day volatility comes out of no where. Needless to say you are not correct about there being no reason. Every trade desk I talk to cautions me about volatility right nowā€¦ the last time they did this with margin was not when the VIX was trading below $10.

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