Margin for BWBs

Discussion in 'Online Brokers' started by Sean, Nov 3, 2016.

  1. Sean

    Sean New Member

    I currently use Options House as my broker. I have an issue with broken wing butterflies, as the platform does not recognize them as a single trade in regards to margin. IT treats both verticals separately and applies margin for each wing individually since they are unbalanced. Therefore I am unable to buy as many lots as I would if I were to place a balanced butterfly with an additional call, or whatever the other variations of this type of trade. Options house said this was industry standard and that they could not fix it in their platform. Is this true? Do any of the other platforms (TOS, IB) recognize the BWB?
     
  2. stevegee58

    stevegee58 Well-Known Member

    IB definitely treats a BWB as 1 trade and calculates the margin requirement as the max risk (i.e. the longer wing)
     
  3. Paul Demers

    Paul Demers Well-Known Member

    See what they do to the margin requirements if you split the short strike by 5 points.
     
  4. PKMTrader

    PKMTrader Member

    Splitting short strikes by 5 points doesn't help either. They need the wings to be of equal length to recognize it as a single trade.
     
  5. BillK

    BillK Member

    I'm hoping OptionsHouse will change their margin policy as they were bought by e*trade recently. e*trade only margins the larger side of an unbalanced condor or butterfly, so hopefully down the road OptionsHouse will follow e*trades margin policy.
     
  6. Andrew C

    Andrew C Well-Known Member

    Reg T aacount on TOS calculates BWB margin taking the max loss on one side less the max loss on the other.
     
  7. TomC

    TomC New Member

    FYI, Fidelity & Schwab have the same problem with margin on a BWB. I've got a VP at Fidelity who is checking into this but I'm not very hopeful.
     
  8. status1

    status1 Well-Known Member

    Wow , I did not know that Optionshouse will merge with Etrade
    Not long ago they just merged with Trademonster
    I had an account with them separately now they are both in one place

    I had a problem with placing bwb trades this past August with both of them since they have the same platform mine was even worse because I was placing a long put bwb so there was no margin at all just the debit and they still using up a lot of margin
    After emailing back and forth and explaining the situation many times eventually someone woke up and realized there was a mistake in their system

    Here is the final response I got from them "Our backend pairing algorithm repairs based on a margin optimizing code. As such, we repair on the backend in a way that allows you to retain the maximum amount of buying power. It appears the strategy priority was overriding this at that time. This generally isn’t the case, thus we applied a fix to have this rectified. As such, you should not have this issue moving forward. "

    So it worked fine for me after that
    So you may have to bug them for a while to look deeper into your situation to see if they can fix it don't just accept the first standard " everybody does it" answer

    I had a similar problem at Optionsxpress The first time they made some kind of manual fix but after a couple of months that person was no longer working there so I had to go through the explanation again and thy came up with some kind of fix so it's working over there also but you have to talk them into fixing it because I am guessing they probably don't have that fix on all the accounts probably just those that do BWB trades
     
  9. Paul Demers

    Paul Demers Well-Known Member

    It is my understanding that FINRA changed their requirements on how to margin complex options spreads. I also understand that they require the margin to be equal to the maximum potential loss. It is also at the discretion of your broker whether they use the new rules. If your broker decided to not implement the new rules then you should find one that does.
     
    Last edited: Nov 8, 2016
  10. stevegee58

    stevegee58 Well-Known Member

    Speaking of margin, I got this message from IB this morning:
    "Pending further notice intraday margin has been suspended due to volatile market conditions."

    Hopefully they don't auto-liquidate any of my positions. I'll know in about 10 minutes.
     

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