Shorting and Liquidation at Interactive Brokers

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Shorting and Liquidation at Interactive Brokers 2017-03-03T15:26:56+00:00
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  • 1696858005@qq.com
    Participant
    Post count: 1

    I’ve been considering moving to Interactive Brokers for the low margin rates, but they apparently assess margin requirements in real time and will autoliquidate positions that stray into margin-call territory — or other positions at random — including after hours and without notifying the customer. I find numerous horror stories online about people who have suffered extensive losses (not to mention IB’s legendarily rude customer service). For example, Yelp has 29 1-star reviews for IB (that they try to hide; they’re on a “Not recommended” page). Some are from professional or longtime investors: http://www.yelp.com/not_recommended_reviews/interactive-brokers-llc-greenwich?not_recommended_start=0

    IB’s margin requirement for short 3X ETFs like TMV is 90% (http://ibkb.interactivebrokers.com/node/1124). TMV can fluctuate 10% in a few days (like the last few and several times last year). Apparently a stop order isn’t adequate protection against liquidation, and I don’t want to get stopped out every few months anyway. Even a 5% stop on 1000 shares of a $25 stock is $1250 a pop. Setting it tighter would stop it out even more frequently. I don’t want to get sold out or stopped out, and I don’t want to have to watch the account every day. I’d like to know how people here have fared.

    Also, someone told me that when he closes one short position and opens another, he doesn’t get charged margin fees at IB except for the 3 settlement days. Is this true?

    Thanks.

  • Vangelis
    Moderator
    Post count: 144

    I have used IB and had no problems with them.
    I cannot really say much about their automatic margin protection (i.e.forced liquidation on margin call) as I have never traded that way. IB provides a portfolio margin account that gives access to way more leverage than would be wise to use. Keep in mind that ‘liquidate on margin call’ policy may be a welcomed protection for smaller traders from big trader’s abuses of margin that could result in the broker going broke.
    As for the last question, I don’t know. If anyone has experience with that, please let us know.

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