Interactive brokers forex margin trade

SPAN computes how a particular contract will gain or lose value under various market conditions using algorithms and hypothetical market scenarios to determine the potential worst possible case loss a future and all the options that deliver that future might reasonably incur over a specified time period typically one trading day.

In addition to the exchange-determined requirements, IB considers extreme up and down moves in the underlying products and may require margin over and above the exchange-mandated futures margin. IB Account Types Interactive Brokers offers several account types that you select in your account application, including a cash account and two types of margin accounts — Reg T Margin and Portfolio Margin.

Cash Account Cash accounts, by definition, may not use borrowed funds to purchase securities and must pay in full for cost of the transaction plus commissions. No shorting of stock is allowed. Limited purchase and sale of options. Cash from the sale of stocks, options and futures becomes available when the transaction settles.

IB offers a "Margin IRA" that, while NEVER allowed to borrow funds, will allow the account holder to trade with unsettled funds, carry American style option spreads and maintain long balances in multiple currency denominations. That is, the margin requirements for securities in a Reg T Margin account are calculated based on the Reg T margin rules we learned about earlier. The Reg. T rules apply to margin for securities products including: U.

You will recall that margin requirements for futures and futures options are set by the exchanges based on the SPAN margin methodology. Portfolio Margin Account Portfolio Margin accounts are risk-based. Positions eligible for Portfolio margin treatment include U. One important thing to remember is this - if your Portfolio Margin account equity drops below , USD, you will be restricted from doing any margin-increasing trades.

Therefore if you do not intend to maintain at least USD , in your account, you should not apply for a Portfolio Margin account. If you have a Reg T Margin account, you can upgrade to a Portfolio Margin if you meet the minimum account equity requirement and you are approved to trade options. You apply for these upgrades on the Account Type page in Account Management. Although your margin account should be viewed as a single account for trading and account monitoring purposes, it consists of two underlying account segments: Securities — The securities segment or your account is governed by rules of the U.

Securities and Exchange Commission. Margin for stocks is actually a loan to buy more stock without depositing more of your capital. In stock purchases, the margin acts as a down payment. Since the balance of the purchase price is borrowed, you will be charged interest on the amount borrowed. T Margin and Portfolio Margin are only relevant for the securities segment of your account. Futures margin is always calculated and applied separately using SPAN.

Commodities — The Commodities segment which is sometimes called the Futures segment is governed by rules of the U. Commodity Futures Trading Commission. Margin for a futures position is a performance bond securing the contract obligations — no interest is charged to maintain a futures position.

Margin for futures is a cash or cash equivalent deposit that can earn interest while it works for you. Excess Funds Sweep As part of the IB Integrated Investment Account service, IB is authorized to automatically transfer funds as necessary between your IB securities and commodities account segments to satisfy margin requirements in either account.

You can configure how you want IB to handle the transfer of excess funds using a feature called Excess Funds Sweep in our Account Management system. This feature lets you choose to sweep funds to the securities account, to the commodities account, or you can choose not to sweep excess funds at all. If you choose not to sweep excess funds, funds will not be swept except to meet margin requirements. Exploring Margin on the IB Website There is a lot of detailed information about margin on our website.

Review them quickly. Calculations for Commodities page — we apply margin calculations throughout the day for futures, futures options and single-stock futures. Calculations work differently at different times. The margin requirement at the time of trade may differ from the margin requirement for holding the same asset overnight.

Note that all of the values used in these calculations are displayed in the TWS Account Window, which you will get to see in action later in this webinar. Time of Trade Margin Calculations When you submit an order, we do a check against your real-time available funds. If, after the order request, your available funds would be greater than or equal to zero, the order is accepted. If available funds would be negative, the order is rejected.

Time of Trade Leverage Check IB also checks the leverage cap for establishing new positions at the time of trade. The leverage cap helps to prevent situations in which there is little or no apparent market risk in holding very large positions but there may be excessive settlement risk.

Margin Calculations Throughout the Day IB also performs real-time margin calculations throughout the day, including maintenance margin calculations, leverage checks, decreased marginability calculations and real time SMA calculations.

Maintenance Margin Calculations IB performs maintenance margin calculations throughout the day for securities and commodities in a Reg. T Margin account. Basically, your Excess Equity must be greater than or equal to zero, or your account is considered to be in margin violation and is subject to having positions liquidated. Leverage Checks IB also checks performs two leverage checks throughout the day: a real-time gross position leverage check and a real-time cash leverage check. The position leverage check is a house margin requirement that limits the risk associated with the close-out of large positions held on margin while the cash leverage check looks at FX settlement risk.

Decreased Marginability IB reduces the marginability of stocks for accounts holding concentrated positions relative to the shares outstanding SHO of a company. In Reg. SMA refers to the Special Memorandum Account, which represents neither equity nor cash, but rather a line of credit created when the market value of securities in a Reg. T margin account increase in value.

Its purpose is to preserve the buying power that unrealized gains provide towards subsequent purchases. Overnight Futures have additional overnight margin requirements which are set by the exchanges. I'll show you where to find these requirements in just a minute.

Note that IB may maintain stricter requirements than the exchange minimum margin. Soft-Edge Margin IB will automatically liquidate positions in an account when the account equity falls below the minimum maintenance margin requirement. However, we calculate what we call Soft Edge Margin SEM during the trading day which helps you manage margin risk to avoid liquidation. To summarize Soft Edge Margin: If your account falls below the minimum maintenance margin, it will not be automatically liquidated until it falls below the Soft Edge Margin.

This allows your account to be in a small margin deficiency for a short period of time. Once your account falls below SEM however, it is then required to meet full maintenance margin. Margin Requirements Tabbed pages display margin requirements each asset type Multiple pages under each tab, often organized by region Demonstrate menu use on stocks and options pages Additional Margin Pages Day Trading pages Reports In this portion of the webinar, I'm going to introduce you to a couple of reports related to margin that you may find useful.

They are: Margin Report These reports like all our reports are available from within Account Management. Margin Report Margin reports show your margin requirements for single and combination positions, and display both available and excess liquidity as well as other values important in IB margin calculations.

Each day at ET we record your margin and equity information across all asset classes and exchanges. Note that because information on your statements is displayed "as of" the cut-off time for each individual exchange, the information in your margin report may be different from that displayed on your statements.

Here is an example of a margin report: To learn more about what's in a margin report, take a look at the Report Reference section in our Reporting Guide, which is available along with all of our other users' guides at Traders' University on our website. The results are based on theoretical pricing models and do not take into account coincidental changes in volatility or other variables that affect derivative prices.

The cash balance of your account. Exposure, which is defined as the amount of money your portfolio will lose in that scenario in excess of the portfolio's Net Liquidation Value on the close of the report date. Monitoring Tools So far, I've introduced you to the basic concepts of margin and margin accounts here at IB, and how we don't have margin calls at IB but we do have real-time liquidation of positions if you don't meet your margin requirements.

Don't panic, however. Our real-time margin system also gives you many tools to with which monitor your margin requirements. Always use the margin monitoring tools to gauge your margin situation. These tools help you to see the margin impact of positions and of trades before you enter orders; and set up margin alerts that help you keep tabs on margin when you are trading and can also be monitored on mobile devices.

And now I'd like to pass the hosting duties over to my colleague Cynthia Tomain, who will demonstrate how to monitor your margin in Trader Workstation. Also available in WebTrader. The Margin Impact field displays in the Order Entry panel and updates when you modify any legs of the combination order. Account Window The Account window displays key account information and allows you to monitor the market value of your account, margin requirements, cash balances and current position information.

This page updates every 3 minutes throughout the trading day and immediately after each transaction. Real-time Balances Shows your account balances for the securities segment, commodities segment and for the account in total.

Net Liquidation Value - the total of all assets position value and cash deposited with IB marked to market — the amount of cash you would get by liquidating all positions, now. Equity with Loan Value - your Collateral - the cash balance combined with position market value.

Note: Option market value is not used for the purpose of borrowing funds. Margin Requirements All accounts are checked throughout the day to be sure certain margin thresholds are met, as well as after each execution or cash transaction posted. It's important to note that the calculation of a margin requirement does not imply that the account is borrowing funds, employing leverage or incurring interest charges.

IB will only generate a margin loan in the event that the account does not have sufficient settled funds to support the purchase of additional securities or holding of existing securities. In situations where there is no margin loan, the reporting of a margin requirement on the trading platform is intended for monitoring the account's financial capacity to sustain a margin loan. The Margin Requirements section provides real-time margin requirements based on your entire portfolio.

These fields display values at expiration and are highlighted in red. All other times the value is "0". The projected values in these fields include the anticipated account value including the expiring contract. To see just the projected margin and excess liquidity values for the expiring contract, double click the entry in the Account window. Read more about Portfolio Margining.

Available for Trading Available Funds — Equity with Loan Value less Initial margin lets you know if funds are available to put on a new trade. Excess Liquidity — Equity with Loan Value less Maintenance margin Lets you know if you are approaching liquidations Buying Power — value of securities you can purchase without depositing additional funds.

In cash accounts this is the settled cash. In a margin account, buying power is increased through the use of leverage using cash and the value of held stock as collateral. The amount of leverage depends upon whether you have a Reg. T Margin or Portfolio Margin account. Special Memorandum Account SMA represents neither equity nor cash but rather a line of credit created when the market value of securities held in a Reg. SMA must remain positive or positions are subject to liquidation.

Note that the day trading rules only apply to securities positions and not commodity futures, options on futures or spot forex transactions. Although IBKR does not directly reference swap rates, IBKR reserves the right to apply higher spreads in exceptional market conditions, such as during spikes in swap rates that can occur around fiscal year-ends. Detailed interest schedules can be viewed here. Margins start as low as 2. Details for all currency pairs can be found here.

Retail clients are subject to minimum regulatory initial margins of 3. Commissions: IBKR passes through the prices that it receives and charges a separate low commission.

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Exposure Fee calculation periods which include a holiday are determined in the same manner as that of a weekend. The fee is calculated on the holiday and charged at the end of the next trading day. The calculation may be subject to change without notice and is based on a proprietary algorithm designed to determine the potential exposure to the firm that an account presents. The Exposure Fee may change each day based on market movements, changes in the account's portfolio, and changes in the formulas and algorithms that IBKR uses to determine the potential risk of the account.

The Exposure Fee is calculated daily and deducted from affected accounts on the following trading day. Accounts subject to the exposure fee should maintain excess equity to avoid a margin deficiency. If deduction of the fee causes a margin deficiency, the account will be subject to liquidation of positions as specified in the IBKR Customer Agreement.

Accounts that are subject to both an overnight position Inventory fee and an Exposure Fee will be charged the greater of the two fees. The Exposure Fee is not a form of insurance. The client is still liable to IBKR to satisfy any account debt or deficit. Whether an account has been assessed and has paid an Exposure Fee does not relieve the account of any liability.

Nor will the debt or deficit to IBKR be offset or reduced by the amount of any exposure fees to which the account may have been assessed at any time. The Exposure Fee is calculated for all assets in the entire portfolio.

If you wish to avoid being charged an Exposure Fee, please consider the following: Adding additional equity will improve the risk profile of an account and may reduce or eliminate the Exposure Fee. Holding one or more highly concentrated single position s generally expose an account to significant risk exposure and, hence, increases the likelihood of an account being assessed an Exposure Fee.

Managing risk through diversification and hedging may reduce the risk and reduce or eliminate the Exposure Fee. Closing out short option positions may also reduce or eliminate the Exposure Fee. Testing has indicated that short positions in low-priced options generate the largest exposures relative to the amount of capital. Please see KB Risk Navigator provides a custom scenario feature which allows an accountholder to determine what effect, if any, changes to their portfolio will have on the Exposure fee.

Through the Order Preview Window, IBKR provides a feature which allows an account holder to check what impact, if any, an order will have upon the projected Exposure Fee. According to StockBrokers. Supporting documentation for any claims and statistical information will be provided upon request.

Disclosures According to StockBrokers. Interactive Brokers calculates the interest charged on margin loans using the applicable rates for each interest rate tier listed on its website. Supporting documentation for any claims and statistical information will be provided upon request. Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

The risk of loss in online trading of stocks, options, futures, currencies, foreign equities, and fixed Income can be substantial. Options involve risk and are not suitable for all investors. Alternatively, call to receive a copy of the ODD. Before trading, clients must read the relevant risk disclosure statements on our Warnings and Disclosures page.