Box Spreads as Loans - Interactive Brokers IBKR - 2021 [and later]

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richardm
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by richardm »

calculon11 wrote: Thu Dec 23, 2021 2:15 pm I freaked out when I saw an instant loss of $10K, so I posted here. Hopefully others can learn from me and be prepared to see an unrealized loss.

On the plus side, I successfully sold my first box and was able to borrow $19,500 at 1.16% for two years.
Congrats! The bid/ask on these things gets weird sometimes.
You'll see wild fluctuations where your account appears to be several thousand in the hole and the boxes appear to be unbalanced. It happens mostly when the market is closed. Just let it go and wait a bit for the numbers to correct.

Having sold and bought back several of these things I can confirm that closing the box won't yield any nasty surprises.
gougou
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by gougou »

Has anyone considered selling 6 month boxes and buying 2 to 5 year boxes at the same time? It looks like you could earn the interest rate differential and you could also leverage your positions. If there isn’t much risk to margin call and interest rate curve stays relatively constant this seems like a good way to invest your cash.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
parval
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by parval »

gougou wrote: Sat Dec 25, 2021 11:05 pm Has anyone considered selling 6 month boxes and buying 2 to 5 year boxes at the same time? It looks like you could earn the interest rate differential and you could also leverage your positions. If there isn’t much risk to margin call and interest rate curve stays relatively constant this seems like a good way to invest your cash.
Ah yes, leverage to make pennies off treasury spreads, this never ended badly :twisted:

https://www.bauer.uh.edu/rsusmel/7386/ltcm-2.htm
gougou
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by gougou »

parval wrote: Sun Dec 26, 2021 8:51 am
gougou wrote: Sat Dec 25, 2021 11:05 pm Has anyone considered selling 6 month boxes and buying 2 to 5 year boxes at the same time? It looks like you could earn the interest rate differential and you could also leverage your positions. If there isn’t much risk to margin call and interest rate curve stays relatively constant this seems like a good way to invest your cash.
Ah yes, leverage to make pennies off treasury spreads, this never ended badly :twisted:

https://www.bauer.uh.edu/rsusmel/7386/ltcm-2.htm
That’s a good read. I wonder how SPX Boxes would trade if the yield curve is inverted.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
Fxmove88
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

There is a mountain of debts from the boxes maturing at the same time on 15 Dec 2023. Will there be any problem in rolling over the debts, given the imminent interest rate hike/Fed's tightening?
Last edited by Fxmove88 on Tue Dec 28, 2021 4:56 am, edited 2 times in total.
skinnybuddha
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by skinnybuddha »

I'll just add that selling a box at Schwab worked for me. The people I talked to had no idea what it was, but I called them after the trade and verified 1) that the trade had reduced my margin amount by the expected amount (I had purchased ETFs that day and briefly had a margin loan) and 2) though they didn't really understand/couldn't explain how it would impact maintenance margin requirements, they ran a hypothetical decline of my ETF positions of 50% through an internal calculator and said it wouldn't result in a margin call. I do not have portfolio margin but they said it wouldn't impact the positions.
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indexfundfan
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by indexfundfan »

Do index options settle on T+1, just like equity options?

PS. This is in reference to when the proceeds from the box sale are credited, not about the settlement on expiry.
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calculon11
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by calculon11 »

richardm wrote: Sat Dec 25, 2021 8:53 pm
calculon11 wrote: Thu Dec 23, 2021 2:15 pm I freaked out when I saw an instant loss of $10K, so I posted here. Hopefully others can learn from me and be prepared to see an unrealized loss.

On the plus side, I successfully sold my first box and was able to borrow $19,500 at 1.16% for two years.
Congrats! The bid/ask on these things gets weird sometimes.
You'll see wild fluctuations where your account appears to be several thousand in the hole and the boxes appear to be unbalanced. It happens mostly when the market is closed. Just let it go and wait a bit for the numbers to correct.

Having sold and bought back several of these things I can confirm that closing the box won't yield any nasty surprises.
I'm seeing really crazy swings on this box. It was down $136K last night while the market was closed. My brokerage account is only like $130K stocks, so would I be at risk at being margin called with these crazy swings? I'm pretty sure the answer is no, but it is still unsettling to think about.

I decided to close the box since I can't stomach seeing these swings, even knowing they are not real. I might try again later with a shorter timeline.
impatientInv
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by impatientInv »

Question - Do we need to close box spreads? or can we let them expire?
I thought we can let them expire.
No individual stocks.
calwatch
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by calwatch »

Yes, you can let it expire and an equivalent debit will be made to your account once that occurs, which may place your account in a margin loan.
LoveTheBogle
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by LoveTheBogle »

I think I’m ready to get my feet wet!

Fidelity client. I’m in between real estate transactions where I am buying before selling.

I am now $200,000 indebted to Fidelity using margin. At 6.825% that is $37 a day! Ouch! I’ll have the margin paid back in approximately 14 days so this buy before sell costs me roughly $518 in interest.

Looking at the shortest term data from boxtrades.com it seems as though I can use April 14 2022 expiration and pay around 0.6% after commissions. Since DTE is 105 days that would be roughly $3.29 a day for 105 is $345 total.

Comparing this to $518 without doing anything or $345 using box trade and have access to extra 200k for a few months longer while paying $173 less interest.

Am I thinking about this correctly?

Here is my thought on transaction:
SPX
Sell 4 14Apr22 4500 call
Buy 4 14Apr22 5000 call
Buy 4 14Apr22 4500 put
Sell 4 14Apr22 5000 put
Net credit of 499.30
Good to cancel
Conditions none
Trade type margin

Preview order says estimated order value is $199,720 with a commission of $10.40. So will end up costing me $290 if filled.

Questions!

Is my understanding of this correct?

Any reason to do 500 spread versus 1000 or even 100? When I looked at 4000 strike for this option chain it had very little to no open interest on far out of the money strikes. Larger spread makes more sense to me to avoid commissions but maybe it comes at not being as easily filled?

Is there an advantage on looking at the option chain and use strikes that have higher than average open interest?

Any reason boxtrades.com lists April 14 2022 as first one when there are some expiring in January, February, March? In this example I only need 30 days not 100 days

Fidelity lists am or pm for each expiration date. Do I use am or pm?
spacecadet610
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by spacecadet610 »

I currently have $100k “borrowed” from SPX box spreads sold this year.

Does anyone know the tax implications of holding the SPX box spread through year end given these SPX options are section 1256 options required to be treated as “mark to market”?

Do I realize a 100k loss for end of 2021?
LoveTheBogle
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by LoveTheBogle »

I got impatient. Here are a few more questions.

I transacted today 12/29/2021. Here is the trade:
All expiration date of January 12, 2022
Limit order Net credit $999.55 Filled as follows
Buy 2 Put 3800 @ 0.62
Buy 2 call 4800 @ 36.89
Sell 2 call 3800 @ 991.95
Sell 2 put 4800 @ 45.31

The fill above reflects 999.75 so I guess my limit order of 999.55 was below market value.

In Fidelity balances the Details section shows margin debit as +199,944.64

Everything look right for my first box trade that will last a little over 2 weeks?

So on January 12 Fidelity will debit my account 200,000 and if I don’t have that much in cash in the account then it will be back to 6.825% interest rate? The whole thing costs me around 60 dollars total with this trade rather than 600 dollars using Fidelity margin for the next 2 weeks.

Gold star?? :)

What about taxes? Being so close to end of the year I would rather close this position and eat the Fidelity margin interest then deal with another tax form and potentially weird tax situation. Can someone elaborate or link to article on how this gets reported and treated for federal income taxes?
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indexfundfan
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by indexfundfan »

It looks like you save on quite a bit of margin interest.

For tax reporting, someone posted this upthread

https://support.tastyworks.com/support/ ... x-options-

Basically, 1256 contracts are mark-to-market at year end so you will have to report this this year, even if you did not close out the position.
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indexfundfan
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by indexfundfan »

spacecadet610 wrote: Wed Dec 29, 2021 3:10 am I currently have $100k “borrowed” from SPX box spreads sold this year.

Does anyone know the tax implications of holding the SPX box spread through year end given these SPX options are section 1256 options required to be treated as “mark to market”?

Do I realize a 100k loss for end of 2021?
No.

I have not traded box spreads but I plan to take loans using box spreads next year and I have been doing some research. The following is what I gather.

The Futures Contract section in your 2021 1099-B will report your loss for year 2021. For example, if you received $97k when you opened the box, and the market value of the box on 12/31 is $98k, then a loss of $1k will be reported for tax year 2021. This is $600 in LT loss and $400 in ST loss.

Now suppose the box expires in 2022. At that point, you will pay back $100k, and for tax year 2022, you will report another $2k in losses. This is $1200 in LT loss and $800 in ST loss.
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richardm
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by richardm »

I agree with the above on the tax treatment of SPX positions. One more thing to add: Section 1256 contracts are not "securities" and are not subject to the wash sale rule. They get marked-to-market at EOY anyway...
adamhg
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by adamhg »

LoveTheBogle wrote: Tue Dec 28, 2021 9:01 pm Any reason boxtrades.com lists April 14 2022 as first one when there are some expiring in January, February, March? In this example I only need 30 days not 100 days
I fixed this. I was excluding them because the trades got pretty wonky the closer they were to expiration, but it makes sense to let each user make their own judgement there. You can now see all unexpired tenors. Enjoy

I also added a few new features, including listing all valid spreads for each tenor and then selecting the strikes with the highest OI as the example trade. Hoping to make things quite a bit simpler on both the buy and sell sides.

Ultimately though, my hope is that if we can standardize on this method for selecting strikes - we could more easily facilitate retail-to-retail trades for box spreads and reduce/remove the market marker spread altogether.

I think there's a strong case to be made to buy boxes in lieu of short/intermediate term treasuries as a near-risk free alternative with better tax-advantaged rates. If the buy side can be bolstered, then liquidity could theoretically be increased to support p2p trading at "fair" rates without slippage.

I potentially have a few 100k to test out (buying) p2p box spreads if anybody is interested in being the (short-side) counterparty (may need a few days to move cash to a brokerage). **please remove this section if its against the rules**

Thoughts?
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indexfundfan
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by indexfundfan »

I would like to say thanks to adamhg for creating the BoxTrades website. It's super useful to give a visual representation of where the trades are.

I just noticed some negative rates in the shorter maturity box spread trades. I'm wondering if those are bugs or are people really paying you to hold their money?
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comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

adamhg wrote: Wed Dec 29, 2021 7:38 pm
LoveTheBogle wrote: Tue Dec 28, 2021 9:01 pm Any reason boxtrades.com lists April 14 2022 as first one when there are some expiring in January, February, March? In this example I only need 30 days not 100 days
Ultimately though, my hope is that if we can standardize on this method for selecting strikes - we could more easily facilitate retail-to-retail trades for box spreads and reduce/remove the market marker spread altogether.

I think there's a strong case to be made to buy boxes in lieu of short/intermediate term treasuries as a near-risk free alternative with better tax-advantaged rates. If the buy side can be bolstered, then liquidity could theoretically be increased to support p2p trading at "fair" rates without slippage.

I potentially have a few 100k to test out (buying) p2p box spreads if anybody is interested in being the (short-side) counterparty (may need a few days to move cash to a brokerage). **please remove this section if its against the rules**

Thoughts?
I think the key to p2p spreads is to find a way to display box quotes from the exchange-native combination order book, which currently no retail broker does, as I think we mentioned earlier in this thread. The fact that this order book is hidden to retail market participants and visible to pros and algos is an unfortunate situation that results in an unfair game.
parval
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by parval »

adamhg wrote: Wed Dec 29, 2021 7:38 pm
LoveTheBogle wrote: Tue Dec 28, 2021 9:01 pm Any reason boxtrades.com lists April 14 2022 as first one when there are some expiring in January, February, March? In this example I only need 30 days not 100 days
I fixed this. I was excluding them because the trades got pretty wonky the closer they were to expiration, but it makes sense to let each user make their own judgement there. You can now see all unexpired tenors. Enjoy

I also added a few new features, including listing all valid spreads for each tenor and then selecting the strikes with the highest OI as the example trade. Hoping to make things quite a bit simpler on both the buy and sell sides.

Ultimately though, my hope is that if we can standardize on this method for selecting strikes - we could more easily facilitate retail-to-retail trades for box spreads and reduce/remove the market marker spread altogether.

I think there's a strong case to be made to buy boxes in lieu of short/intermediate term treasuries as a near-risk free alternative with better tax-advantaged rates. If the buy side can be bolstered, then liquidity could theoretically be increased to support p2p trading at "fair" rates without slippage.

I potentially have a few 100k to test out (buying) p2p box spreads if anybody is interested in being the (short-side) counterparty (may need a few days to move cash to a brokerage). **please remove this section if its against the rules**

Thoughts?
I'm down to make our own dark pool on BH :D

Actually need a few 100k when new yrs hits, any chance you'd take DEC2023 at 1% :D

-edit forgot to mention in terms of strikes, i like round numbers so 4000-5000'd be great
adamhg
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by adamhg »

indexfundfan wrote: Wed Dec 29, 2021 8:14 pm I would like to say thanks to adamhg for creating the BoxTrades website. It's super useful to give a visual representation of where the trades are.

I just noticed some negative rates in the shorter maturity box spread trades. I'm wondering if those are bugs or are people really paying you to hold their money?
Thanks for the kind words. I don't really know how people are getting those negative rates other than maybe somebody keyed in a long as a short or vv. There are some _really_ crazy ones for the short DTEs which is why I originally had them hidden. I can't even filter them out based on sigma because the closer to expiry, the wilder the trades get. So you're guess is as good as mine.
comeinvest wrote: Thu Dec 30, 2021 3:06 am I think the key to p2p spreads is to find a way to display box quotes from the exchange-native combination order book, which currently no retail broker does, as I think we mentioned earlier in this thread. The fact that this order book is hidden to retail market participants and visible to pros and algos is an unfortunate situation that results in an unfair game.
What if we just keyed our open trades in? I'm happy to update the interface and add a "this is my current bid/ask" option and just show those up on the screen? AFAIK there's no other way to get L2 quotes as retail so seems like we'd just have to tell each other. Main risk I can see is maybe putting up "fake" orders, but I can't really see what that could accomplish
parval wrote: Thu Dec 30, 2021 9:18 am I'm down to make our own dark pool on BH :D

Actually need a few 100k when new yrs hits, any chance you'd take DEC2023 at 1% :D

-edit forgot to mention in terms of strikes, i like round numbers so 4000-5000'd be great
I'm looking at loaning these out as cash alternative, so personally probably looking at a bit shorter tenor. Though I could see these also working as a juicier STT/ITT alternative. Let me get back to you on this one, but otherwise open to maybe Mar-Apr expiry. I could maybe do a longer one with a smaller amount just to test the p2p concept for fun
ZzXxAlpha
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by ZzXxAlpha »

skinnybuddha wrote: Mon Dec 27, 2021 11:39 pm I'll just add that selling a box at Schwab worked for me. The people I talked to had no idea what it was, but I called them after the trade and verified 1) that the trade had reduced my margin amount by the expected amount (I had purchased ETFs that day and briefly had a margin loan) and 2) though they didn't really understand/couldn't explain how it would impact maintenance margin requirements, they ran a hypothetical decline of my ETF positions of 50% through an internal calculator and said it wouldn't result in a margin call. I do not have portfolio margin but they said it wouldn't impact the positions.
To the few traders here that use Schwab as their broker to execute the short box spread strategy: it seems I am also able to execute a couple SPX Box spreads with Exp in DEC'22' netting me ~$49.6k cash increase each in my brokerage account (standard taxable).

My executed spreads are:

4500 / 5000 spread on the call and put spread. APY is ~0.754% expiring in Dec-2022.

Now, as many of you noted, Schwab does not provide clear example of Margin breakdown, and so far, I am not able to withdraw the cash out of the my account. I planned to place a call to the Schwab Margins dept next week, but seems like chances of getting clarity is also hit or miss based on a few comments by posters.

So, hoping someone can share their box spread trade examples through Schwab, especially if they were able to withdraw cash out of the account (and rough percentages/amount changes of the account Margins). Thanks and Happy New Year!
Last edited by ZzXxAlpha on Sat Jan 01, 2022 1:24 pm, edited 1 time in total.
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

ZzXxAlpha wrote: Sat Jan 01, 2022 1:23 pm
skinnybuddha wrote: Mon Dec 27, 2021 11:39 pm I'll just add that selling a box at Schwab worked for me. The people I talked to had no idea what it was, but I called them after the trade and verified 1) that the trade had reduced my margin amount by the expected amount (I had purchased ETFs that day and briefly had a margin loan) and 2) though they didn't really understand/couldn't explain how it would impact maintenance margin requirements, they ran a hypothetical decline of my ETF positions of 50% through an internal calculator and said it wouldn't result in a margin call. I do not have portfolio margin but they said it wouldn't impact the positions.
To the few traders here that use Schwab as their broker to execute the short box spread strategy: it seems I am also able to execute a couple SPX Box spreads with Exp in DEC'22' netting me ~$49.6k cash increase each in my brokerage account (standard taxable).

My executed spreads are:

4500 / 5000 spread on the call and put spread. APY is ~0.754% expiring in Dec-2022.

Now, as many of you noted, Schwab does not provide clear example of Margin breakdown, and so far, I am not able to withdraw the cash out of the my account. I planned to place a call to the Schwab Margins dept next week, but seems like chances of getting clarity is also hit or miss based on a few comments by posters.

So, hoping someone can share their box spread trade examples through Schwab, especially if they were able to withdraw cash out of the account (and rough percentages/amount changes of the account Margins). Thanks and Happy New Year!
If you go to the Balances page for your account, it has "To Trade" and "To Withdraw" sections. Please let us know how those changed before/after your box spread trade. Ideally both would have not changed materially, as is the case with IB, i.e. the box spread replaces the margin loan almost 1:1 with (almost) no additional margin requirement.
ZzXxAlpha
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by ZzXxAlpha »

comeinvest wrote: Sun Jan 02, 2022 3:47 pm If you go to the Balances page for your account, it has "To Trade" and "To Withdraw" sections. Please let us know how those changed before/after your box spread trade. Ideally both would have not changed materially, as is the case with IB, i.e. the box spread replaces the margin loan almost 1:1 with (almost) no additional margin requirement.
I guess that's my confusion. Both indeed did not change by much before and after I executed the box spreads. But that also mean I cannot withdraw the proceeds from the box spread out of this account right (i.e. I received $49.6k in cash balance, but my liabilities went up by the same amount through the box spread position) ?

Looks like, the best case I can do is: if I had carried any balance subjected to Margin Interest, that balance will be reduced by the amount of proceeds from trading the Box.
drk
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by drk »

indexfundfan wrote: Wed Dec 29, 2021 8:14 pm I just noticed some negative rates in the shorter maturity box spread trades. I'm wondering if those are bugs or are people really paying you to hold their money?
Maybe people getting liquidated?
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
getco
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by getco »

ZzXxAlpha wrote: Sun Jan 02, 2022 4:30 pm Looks like, the best case I can do is: if I had carried any balance subjected to Margin Interest, that balance will be reduced by the amount of proceeds from trading the Box.
That is correct, and not unique to Schwab.

-g
ZzXxAlpha
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by ZzXxAlpha »

Appreciate your simple answer getco.

As a general question to this 14 page thread: has anyone, on any brokerage platform (IKBR, Schwab, TDA, Fidelity, etc.) succeeded in withdrawing cash from their brokerage account through this strategy of getting near rock bottom rates?
stay_the_course
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by stay_the_course »

ZzXxAlpha wrote: Sun Jan 02, 2022 10:31 pm Appreciate your simple answer getco.

As a general question to this 14 page thread: has anyone, on any brokerage platform (IKBR, Schwab, TDA, Fidelity, etc.) succeeded in withdrawing cash from their brokerage account through this strategy of getting near rock bottom rates?
Why not withdraw cash on margin and then the proceeds from the box sale should bring your margin debit back to 0 (which in essence means you are paying the interest implied by the box rather than the brokers rate). I’m doing something similar with etrade.
calwatch
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by calwatch »

ZzXxAlpha wrote: Sun Jan 02, 2022 10:31 pm Appreciate your simple answer getco.

As a general question to this 14 page thread: has anyone, on any brokerage platform (IKBR, Schwab, TDA, Fidelity, etc.) succeeded in withdrawing cash from their brokerage account through this strategy of getting near rock bottom rates?
Yes. I am doing so on Ameritrade. The entry looks as follows:
Image
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

stay_the_course wrote: Mon Jan 03, 2022 12:05 am
ZzXxAlpha wrote: Sun Jan 02, 2022 10:31 pm Appreciate your simple answer getco.

As a general question to this 14 page thread: has anyone, on any brokerage platform (IKBR, Schwab, TDA, Fidelity, etc.) succeeded in withdrawing cash from their brokerage account through this strategy of getting near rock bottom rates?
Why not withdraw cash on margin and then the proceeds from the box sale should bring your margin debit back to 0 (which in essence means you are paying the interest implied by the box rather than the brokers rate). I’m doing something similar with etrade.
That is the general idea.
@ZzXxAlpha : If your available cash to trade and cash to withdraw did not change much before vs. after the box trade, I think that is exactly the best outcome you could have expected, and the same that I get with IB. Boxes are used to replace broker's margin, not to create cash out of thin air. And you can only sell boxes if you have a margin account in the first place. (An exception is an IRA with limited margin, where selling boxes is useless as the margin requirement of the box is identical to the value of the box.)

Whether you first withdraw the cash (via broker's margin) and then sell the box, or the other way around, should not matter.

@ZzXxAlpha : you said your account is "standard taxable". Do you mean Reg T margin, or do you have portfolio margin? I generally recommend portfolio margin, because I hear that Reg T margin results in unnecessary complexity that is above my head. Schwab now seems to offer PM, you have to apply for it: viewtopic.php?p=6398869#p6398869
ironcondor
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by ironcondor »

Hello fellow savers!

I'm new to Box Spreads and ready to pull the trigger on a small box spread...learning by doing.

I've started using TD Ameritrade but am slightly uncomfortable with the interface. Can someone confirm whether I entered this trade correctly? Specifically, whether all four legs are going to execute in a single trade (not in separate trades)? Image

My goal is to borrow ($10k - loan cost) with "payback" on Dec 17, 2026. Loan cost should come out at around 1.5% APY according to https://www.boxtrades.com/SPX/18DEC26. I'm planning on slowly working up the price if it doesn't get filled at $93.70.

Thanks for your help!
DMoogle
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by DMoogle »

ironcondor wrote: Mon Jan 03, 2022 10:20 am Hello fellow savers!

I'm new to Box Spreads and ready to pull the trigger on a small box spread...learning by doing.

I've started using TD Ameritrade but am slightly uncomfortable with the interface. Can someone confirm whether I entered this trade correctly? Specifically, whether all four legs are going to execute in a single trade (not in separate trades)?

My goal is to borrow ($10k - loan cost) with "payback" on Dec 17, 2026. Loan cost should come out at around 1.5% APY according to https://www.boxtrades.com/SPX/18DEC26. I'm planning on slowly working up the price if it doesn't get filled at $93.70.

Thanks for your help!
Disclosure: I'm not familiar with TDA's interface, and I'm relatively new to these myself (although I suppose most people on here are).

This looks good, except I'm not getting the 1.5% rate at $93.70; I'm seeing 1.358% before commission, 1.406% after commission.

Looking at the trend of rates, it's very unlikely you'll get filled that low - most fills in the past month have been around 1.7%. It's also worth noting that 5-year options are pretty new, so they're a bit less liquid overall and that may make it even more difficult to get a fill.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by indexfundfan »

ironcondor wrote: Mon Jan 03, 2022 10:20 am My goal is to borrow ($10k - loan cost) with "payback" on Dec 17, 2026. Loan cost should come out at around 1.5% APY according to https://www.boxtrades.com/SPX/18DEC26. I'm planning on slowly working up the price if it doesn't get filled at $93.70.
Looks correct to me. But like DMoogle said, it's unlikely to fill at $93.70.

And you need to work DOWN the price, not up. According to the recent trades from BoxTrades.com, the last filled prices were in the range of $92+.
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ZzXxAlpha
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by ZzXxAlpha »

comeinvest wrote: Mon Jan 03, 2022 4:29 am
stay_the_course wrote: Mon Jan 03, 2022 12:05 am
ZzXxAlpha wrote: Sun Jan 02, 2022 10:31 pm Appreciate your simple answer getco.

As a general question to this 14 page thread: has anyone, on any brokerage platform (IKBR, Schwab, TDA, Fidelity, etc.) succeeded in withdrawing cash from their brokerage account through this strategy of getting near rock bottom rates?
Why not withdraw cash on margin and then the proceeds from the box sale should bring your margin debit back to 0 (which in essence means you are paying the interest implied by the box rather than the brokers rate). I’m doing something similar with etrade.
That is the general idea.
@ZzXxAlpha : If your available cash to trade and cash to withdraw did not change much before vs. after the box trade, I think that is exactly the best outcome you could have expected, and the same that I get with IB. Boxes are used to replace broker's margin, not to create cash out of thin air. And you can only sell boxes if you have a margin account in the first place. (An exception is an IRA with limited margin, where selling boxes is useless as the margin requirement of the box is identical to the value of the box.)

Whether you first withdraw the cash (via broker's margin) and then sell the box, or the other way around, should not matter.

@ZzXxAlpha : you said your account is "standard taxable". Do you mean Reg T margin, or do you have portfolio margin? I generally recommend portfolio margin, because I hear that Reg T margin results in unnecessary complexity that is above my head. Schwab now seems to offer PM, you have to apply for it: viewtopic.php?p=6398869#p6398869
My account currently does not have PM enabled, and I applied for it last week.

Looking over my balances details:

To Trade:
Cash+Cash Investments: $250k
Cash + Borrowing: 795k (Schwab's term for Margin buying power essentially)

To Withdraw:
Cash+Cash Investments: $250k
Borrowing: $0
Cash + Borrowing: $250k

It looks like I am unable to withdraw those proceeds. I currently carry $0 in margin balance. Would this be something that needs to be enabled through portfolio margin application?
ZzXxAlpha
Posts: 6
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by ZzXxAlpha »

ZzXxAlpha wrote: Mon Jan 03, 2022 10:53 am
comeinvest wrote: Mon Jan 03, 2022 4:29 am
stay_the_course wrote: Mon Jan 03, 2022 12:05 am
ZzXxAlpha wrote: Sun Jan 02, 2022 10:31 pm Appreciate your simple answer getco.

As a general question to this 14 page thread: has anyone, on any brokerage platform (IKBR, Schwab, TDA, Fidelity, etc.) succeeded in withdrawing cash from their brokerage account through this strategy of getting near rock bottom rates?
Why not withdraw cash on margin and then the proceeds from the box sale should bring your margin debit back to 0 (which in essence means you are paying the interest implied by the box rather than the brokers rate). I’m doing something similar with etrade.
That is the general idea.
@ZzXxAlpha : If your available cash to trade and cash to withdraw did not change much before vs. after the box trade, I think that is exactly the best outcome you could have expected, and the same that I get with IB. Boxes are used to replace broker's margin, not to create cash out of thin air. And you can only sell boxes if you have a margin account in the first place. (An exception is an IRA with limited margin, where selling boxes is useless as the margin requirement of the box is identical to the value of the box.)

Whether you first withdraw the cash (via broker's margin) and then sell the box, or the other way around, should not matter.

@ZzXxAlpha : you said your account is "standard taxable". Do you mean Reg T margin, or do you have portfolio margin? I generally recommend portfolio margin, because I hear that Reg T margin results in unnecessary complexity that is above my head. Schwab now seems to offer PM, you have to apply for it: viewtopic.php?p=6398869#p6398869
My account currently does not have PM enabled, and I applied for it last week.

Looking over my balances details:

To Trade:
Cash+Cash Investments: $250k
Cash + Borrowing: 795k (Schwab's term for Margin buying power essentially)

To Withdraw:
Cash+Cash Investments: $250k
Borrowing: $0
Cash + Borrowing: $250k

It looks like I am unable to withdraw those proceeds. I currently carry $0 in margin balance. Would this be something that needs to be enabled through portfolio margin application?
It looks like Schwab is putting a 100k margin requirement on my 100k Box spread positions...... the right most column is Margin Requirement.

Image
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by indexfundfan »

I sold a small box today and can confirm that it works at Etrade. The proceeds show up as being available for cash withdrawal (not margin withdrawal). The margin requirement is the options spread. I only have Reg. T margin.
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LoveTheBogle
Posts: 188
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by LoveTheBogle »

I did a cash withdrawal to use margin. I then sold short box trade and the margin disappeared. Instead of paying over 6 percent to broker I am paying around 1 percent (really short duration).

I’ll try a small box later after I am flat and not using margin to see if it increases my available cash to withdrawal.

Fidelity
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by corp_sharecropper »

I apologize if this has been discussed but I was unable to find the answer using Google or forum search.

Does anyone know if it's possible to use box spreads in a Roth IRA? I know "margin", as the term is typically used, is generally forbidden in an IRA. But we all know IBKR and TDA allow various options and futures in an IRA. Can the credit from about spread be used for purchasing other securities or as collateral for options/futures in a Roth IRA?
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

LoveTheBogle wrote: Tue Jan 04, 2022 7:30 pm I did a cash withdrawal to use margin. I then sold short box trade and the margin disappeared. Instead of paying over 6 percent to broker I am paying around 1 percent (really short duration).

I’ll try a small box later after I am flat and not using margin to see if it increases my available cash to withdrawal.

Fidelity
You should get the same result. Please let us know once you confirmed.
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

ZzXxAlpha wrote: Mon Jan 03, 2022 11:06 am
ZzXxAlpha wrote: Mon Jan 03, 2022 10:53 am
comeinvest wrote: Mon Jan 03, 2022 4:29 am
stay_the_course wrote: Mon Jan 03, 2022 12:05 am
ZzXxAlpha wrote: Sun Jan 02, 2022 10:31 pm Appreciate your simple answer getco.

As a general question to this 14 page thread: has anyone, on any brokerage platform (IKBR, Schwab, TDA, Fidelity, etc.) succeeded in withdrawing cash from their brokerage account through this strategy of getting near rock bottom rates?
Why not withdraw cash on margin and then the proceeds from the box sale should bring your margin debit back to 0 (which in essence means you are paying the interest implied by the box rather than the brokers rate). I’m doing something similar with etrade.
That is the general idea.
@ZzXxAlpha : If your available cash to trade and cash to withdraw did not change much before vs. after the box trade, I think that is exactly the best outcome you could have expected, and the same that I get with IB. Boxes are used to replace broker's margin, not to create cash out of thin air. And you can only sell boxes if you have a margin account in the first place. (An exception is an IRA with limited margin, where selling boxes is useless as the margin requirement of the box is identical to the value of the box.)

Whether you first withdraw the cash (via broker's margin) and then sell the box, or the other way around, should not matter.

@ZzXxAlpha : you said your account is "standard taxable". Do you mean Reg T margin, or do you have portfolio margin? I generally recommend portfolio margin, because I hear that Reg T margin results in unnecessary complexity that is above my head. Schwab now seems to offer PM, you have to apply for it: viewtopic.php?p=6398869#p6398869
My account currently does not have PM enabled, and I applied for it last week.

Looking over my balances details:

To Trade:
Cash+Cash Investments: $250k
Cash + Borrowing: 795k (Schwab's term for Margin buying power essentially)

To Withdraw:
Cash+Cash Investments: $250k
Borrowing: $0
Cash + Borrowing: $250k

It looks like I am unable to withdraw those proceeds. I currently carry $0 in margin balance. Would this be something that needs to be enabled through portfolio margin application?
It looks like Schwab is putting a 100k margin requirement on my 100k Box spread positions...... the right most column is Margin Requirement.

Image
That would not be good. I personally don't know if Reg T vs PM makes a difference in your situation, as I don't use Reg T because I see no reason why I would bother with Reg T.

To my question "If you go to the Balances page for your account, it has "To Trade" and "To Withdraw" sections. Please let us know how those changed before/after your box spread trade" you said before: "Both indeed did not change by much before and after I executed the box spreads." Did you have cash available to withdraw before you sold the box? If not, then I conclude the problem is not the box itself. Did you have balance "To Trade" before the box spread? Do you have any now? If your margin requirement is the value of the box, then both "To Trade" and "To Withdraw" should have been reduced as you sold the box, in contradiction to what you said before.
ZzXxAlpha
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by ZzXxAlpha »

comeinvest wrote: Tue Jan 04, 2022 11:00 pm
ZzXxAlpha wrote: Mon Jan 03, 2022 11:06 am
ZzXxAlpha wrote: Mon Jan 03, 2022 10:53 am
comeinvest wrote: Mon Jan 03, 2022 4:29 am
stay_the_course wrote: Mon Jan 03, 2022 12:05 am

Why not withdraw cash on margin and then the proceeds from the box sale should bring your margin debit back to 0 (which in essence means you are paying the interest implied by the box rather than the brokers rate). I’m doing something similar with etrade.
That is the general idea.
@ZzXxAlpha : If your available cash to trade and cash to withdraw did not change much before vs. after the box trade, I think that is exactly the best outcome you could have expected, and the same that I get with IB. Boxes are used to replace broker's margin, not to create cash out of thin air. And you can only sell boxes if you have a margin account in the first place. (An exception is an IRA with limited margin, where selling boxes is useless as the margin requirement of the box is identical to the value of the box.)

Whether you first withdraw the cash (via broker's margin) and then sell the box, or the other way around, should not matter.

@ZzXxAlpha : you said your account is "standard taxable". Do you mean Reg T margin, or do you have portfolio margin? I generally recommend portfolio margin, because I hear that Reg T margin results in unnecessary complexity that is above my head. Schwab now seems to offer PM, you have to apply for it: viewtopic.php?p=6398869#p6398869
My account currently does not have PM enabled, and I applied for it last week.

Looking over my balances details:

To Trade:
Cash+Cash Investments: $250k
Cash + Borrowing: 795k (Schwab's term for Margin buying power essentially)

To Withdraw:
Cash+Cash Investments: $250k
Borrowing: $0
Cash + Borrowing: $250k

It looks like I am unable to withdraw those proceeds. I currently carry $0 in margin balance. Would this be something that needs to be enabled through portfolio margin application?
It looks like Schwab is putting a 100k margin requirement on my 100k Box spread positions...... the right most column is Margin Requirement.

Image
That would not be good. I personally don't know if Reg T vs PM makes a difference in your situation, as I don't use Reg T because I see no reason why I would bother with Reg T.

To my question "If you go to the Balances page for your account, it has "To Trade" and "To Withdraw" sections. Please let us know how those changed before/after your box spread trade" you said before: "Both indeed did not change by much before and after I executed the box spreads." Did you have cash available to withdraw before you sold the box? If not, then I conclude the problem is not the box itself. Did you have balance "To Trade" before the box spread? Do you have any now? If your margin requirement is the value of the box, then both "To Trade" and "To Withdraw" should have been reduced as you sold the box, in contradiction to what you said before.
Thanks comeinvest for your helpful discussion. I have a dozen or so other options positions (ratio spreads, strangles, covered calls,etc), and I did not have the cleanest tracking to the before/after as you commented. I observe that I had some money in the 'To Trade" portion before I executed the box spread.After I executed the spread - my "To Trade" numbers did not diminish by 100k as suggested by my screenshot.

Furthermore - I actually sold two box spreads, each having the same strikes, exp. dates. So it's essentially 2x$50k. I was able to buy back one of the box spreads today for essentially 0 loss, and I noticed that my Margin BP did not "increase" by 50k.

This is all rather strange - and I did place one more call to Schwab Margins Rep who told me that Charles Schwab treat Box Spreads as if it's the summation of two credit spreads - thus 100k Margin requirement. Although.... when I commented that this is totally different than what their website calls out (screenshot below). He simply said something to the effect of "I regret that it may not be clear, but it's 100k"

Image

I managed to rope my friend into doing this on his Schwab margin account. He has a fairly clean slate in terms of margin and open positions, and with his permission, I'll share update here. We plan to withdraw some money and incur a margin balance; Then execute a small Box spread position, and see if we are able to swap out the broker charged high margin interest, with low Box Spread effective interest.

I'll also execute this on my eTrade and IKBR account and see how it goes.
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

ZzXxAlpha wrote: Tue Jan 04, 2022 11:37 pm
comeinvest wrote: Tue Jan 04, 2022 11:00 pm
ZzXxAlpha wrote: Mon Jan 03, 2022 11:06 am
ZzXxAlpha wrote: Mon Jan 03, 2022 10:53 am
comeinvest wrote: Mon Jan 03, 2022 4:29 am

That is the general idea.
@ZzXxAlpha : If your available cash to trade and cash to withdraw did not change much before vs. after the box trade, I think that is exactly the best outcome you could have expected, and the same that I get with IB. Boxes are used to replace broker's margin, not to create cash out of thin air. And you can only sell boxes if you have a margin account in the first place. (An exception is an IRA with limited margin, where selling boxes is useless as the margin requirement of the box is identical to the value of the box.)

Whether you first withdraw the cash (via broker's margin) and then sell the box, or the other way around, should not matter.

@ZzXxAlpha : you said your account is "standard taxable". Do you mean Reg T margin, or do you have portfolio margin? I generally recommend portfolio margin, because I hear that Reg T margin results in unnecessary complexity that is above my head. Schwab now seems to offer PM, you have to apply for it: viewtopic.php?p=6398869#p6398869
My account currently does not have PM enabled, and I applied for it last week.

Looking over my balances details:

To Trade:
Cash+Cash Investments: $250k
Cash + Borrowing: 795k (Schwab's term for Margin buying power essentially)

To Withdraw:
Cash+Cash Investments: $250k
Borrowing: $0
Cash + Borrowing: $250k

It looks like I am unable to withdraw those proceeds. I currently carry $0 in margin balance. Would this be something that needs to be enabled through portfolio margin application?
It looks like Schwab is putting a 100k margin requirement on my 100k Box spread positions...... the right most column is Margin Requirement.

Image
That would not be good. I personally don't know if Reg T vs PM makes a difference in your situation, as I don't use Reg T because I see no reason why I would bother with Reg T.

To my question "If you go to the Balances page for your account, it has "To Trade" and "To Withdraw" sections. Please let us know how those changed before/after your box spread trade" you said before: "Both indeed did not change by much before and after I executed the box spreads." Did you have cash available to withdraw before you sold the box? If not, then I conclude the problem is not the box itself. Did you have balance "To Trade" before the box spread? Do you have any now? If your margin requirement is the value of the box, then both "To Trade" and "To Withdraw" should have been reduced as you sold the box, in contradiction to what you said before.
Thanks comeinvest for your helpful discussion. I have a dozen or so other options positions (ratio spreads, strangles, covered calls,etc), and I did not have the cleanest tracking to the before/after as you commented. I observe that I had some money in the 'To Trade" portion before I executed the box spread.After I executed the spread - my "To Trade" numbers did not diminish by 100k as suggested by my screenshot.

Furthermore - I actually sold two box spreads, each having the same strikes, exp. dates. So it's essentially 2x$50k. I was able to buy back one of the box spreads today for essentially 0 loss, and I noticed that my Margin BP did not "increase" by 50k.
If the margin requirement of the box was indeed the value of the box, then I think when you sold/bought your box, your margin BP should have decreased / increased a lot more than the value of the box - about 6-7 times as much, because the normal margin requirement of equities is ca. 15%. At least for portfolio margin (PM). For Reg T I think it would be 2 times. But surely it should have changed by more than 50k.

EDIT: I think the indicated margin requirements on your positions page are the actual margin requirements with i.e. including the value of the cash that the box generated. (Cash itself has no margin requirement.) The margin requirement is about equal to your liability arising from the box. ** This is NOT the excess margin available funds that you need to initiate the box trade. **
If my interpretation is right, it would be consistent with the language on Schwab's options margin page "Lesser of: Sum of component initial naked requirements and Maximum potential loss of strategy". Your potential loss (and in case of a box your assured loss) is the difference in strike prices * 100. (EDIT: I'm not 100% sure about Schwab's definition of "potential loss". IB seems to have a more strict "MAX(1.02 x cost to close, Long Call Strike – Short Call Strike)", where "cost to close" is not defined.)
Also, note that in your screenshot Schwab does recognize your legs as part of a "short box spread".
In summary, I think your "available to trade" and "available to withdraw" numbers probably did not materially change before vs after your box trade. Please verify if you have a chance.

If all that speculation from my side is correct, it is admittedly confusing, because IB seems to use a different language / terminology. When I right-click on my -1 SPX box, "Description", it says "margin impact of spread: [a very small number less than 0.1% the size of the box, in this case $112 for a box of about $200k]. They must be referring to the margin requirement without i.e. excluding the value of the cash that the box generated, because surely I would not be able to sell a $200k box i.e. have a $200k liability with total equity of $112 in my account. Maybe we can say the "margin impact" is the excess liquidity available funds I need initiate the box trade.
Once I had a short box in my IB IRA by mistake, and the margin impact showed a value about the size of the box, i.e. the box was useless.

EDIT 2: I doubt that the rightmost column is the margin requirement. Margin requirements cannot be negative, right? I suspect the rightmost column is your cost basis, the third from the left the current value, and the leftmost perhaps the margin requirement?

Also compare to the language of other brokers:
Tradestation: https://www.tradestation.com/pricing/op ... uirements/
IB: https://www.interactivebrokers.co.uk/en ... hp?f=42076 (note the "Short Box Spread" section on this page is only for Reg T)
Schwab seems to require the size of the spread as margin for a non-box spread, i.e. for a box (consisting of 2 vertical spreads) the margin requirement halves.
Tradestation seems to require about twice the maintenance margin for initial margin, if I read it right ("Net Premium + (Strike Price Long Call – Strike Price Short Call) x Contracts x Multiplier" for initial, "(Strike Price Long Call – Strike Price Short Call) x Contracts x Multiplier" for maintenance). Really confusing.
IB specifies only the margin requirement without the value of the generated cash (the margin impact, i.e. very small numbers for boxes) on their page.

To me personally, from a systematic and consistent terminology point of view, it would make more sense to refer to the margin impact (e.g. the $112) as "margin requirement" to satisfy the equation "sum(margin req's of all positions) < account equity", as the (negative) value of the box and the (positive) value of the generated cash would net to zero i.e. no change in equity.

Caveat: I'm a beginner with options, trying to figure it out. More experienced options traders, please correct me if my terminology or interpretation is wrong.
ZzXxAlpha wrote: Tue Jan 04, 2022 11:37 pm This is all rather strange - and I did place one more call to Schwab Margins Rep who told me that Charles Schwab treat Box Spreads as if it's the summation of two credit spreads - thus 100k Margin requirement. Although.... when I commented that this is totally different than what their website calls out (screenshot below). He simply said something to the effect of "I regret that it may not be clear, but it's 100k"

Image

I managed to rope my friend into doing this on his Schwab margin account. He has a fairly clean slate in terms of margin and open positions, and with his permission, I'll share update here. We plan to withdraw some money and incur a margin balance; Then execute a small Box spread position, and see if we are able to swap out the broker charged high margin interest, with low Box Spread effective interest.

I'll also execute this on my eTrade and IKBR account and see how it goes.
I think we have enough data points in this thread that boxes work as intended at ETrade and at IB. I'm still curious about Schwab. Please check your balances once PM (portfolio margin) is enabled on your account.
calwatch
Posts: 1447
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by calwatch »

I want to report that, for my $140,000 in boxes ($90,000 for December 2022 and $50,000 in December 2023), I have $5,971 in paper gains I will have to pay taxes on. For the 2022 boxes I have a $4,484 paper gain that presumably would turn into a loss upon expiration at the end of the year, so an offsetting $4,484 or more capital loss at end of 2022. Just a risk to be aware of, especially if you need to massage income for ACA, EITC, or other purposes. This was generated using Gainskeeper on TD Ameritrade. You don't report the transactions individually since this is mark to market, you report it in one lump sum on Form 6781, but the individual details are available if you like.

Code: Select all

Security	Trans type	Qty	Open date	Adj cost	Close date	Adj proceeds	Gain adj	Adj ST gain($)	Adj LT gain($)	Adj OR gain($)
SPX Dec 15 2023 4000.0 Call*	Short MTM Sell	100	10/5/2021	104,876.00	12/31/2021	70,262.68		-13,845.33	-20,767.99	
SPX Dec 15 2023 4000.0 Put*	MTM Sell	100	10/5/2021	41,657.32	12/31/2021	29,250.00		-4,962.93	-7,444.39	
SPX Dec 15 2023 4500.0 Call*	MTM Sell	100	10/5/2021	41,262.32	12/31/2021	71,377.00		12,045.87	18,068.81	
SPX Dec 15 2023 4500.0 Put*	Short MTM Sell	100	10/5/2021	43,489.00	12/31/2021	61,881.68		7,357.07	11,035.61	
SPX Dec 16 2022 4000.0 Call*	Short MTM Sell	100	9/20/2021	91,800.00	12/31/2021	58,534.68		-13,306.13	-19,959.19	
SPX Dec 16 2022 4000.0 Call*	Short MTM Sell	100	9/24/2021	91,800.00	12/31/2021	66,007.68		-10,316.93	-15,475.39	
SPX Dec 16 2022 4000.0 Call*	Short MTM Sell	100	11/18/2021	91,800.00	12/31/2021	85,363.68		-2,574.53	-3,861.79	
SPX Dec 16 2022 4000.0 Put*	MTM Sell	100	9/20/2021	31,960.32	12/31/2021	16,900.00		-6,024.13	-9,036.19	
SPX Dec 16 2022 4000.0 Put*	MTM Sell	100	9/24/2021	26,290.32	12/31/2021	16,900.00		-3,756.13	-5,634.19	
SPX Dec 16 2022 4000.0 Put*	MTM Sell	100	11/18/2021	19,204.32	12/31/2021	16,900.00		-921.73	-1,382.59	
SPX Dec 16 2022 4300.0 Call*	MTM Sell	100	9/20/2021	39,166.32	12/31/2021	69,740.00		12,229.47	18,344.21	
SPX Dec 16 2022 4300.0 Call*	MTM Sell	100	9/24/2021	45,279.32	12/31/2021	69,740.00		9,784.27	14,676.41	
SPX Dec 16 2022 4300.0 Call*	MTM Sell	100	11/18/2021	62,586.32	12/31/2021	69,740.00		2,861.47	4,292.21	
SPX Dec 16 2022 4300.0 Put*	Short MTM Sell	100	9/20/2021	23,140.00	12/31/2021	42,386.68		7,698.67	11,548.01	
SPX Dec 16 2022 4300.0 Put*	Short MTM Sell	100	9/24/2021	23,140.00	12/31/2021	35,381.68		4,896.67	7,345.01	
SPX Dec 16 2022 4300.0 Put*	Short MTM Sell	100	11/18/2021	23,140.00	12/31/2021	26,196.68		1,222.67	1,834.01	
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by indexfundfan »

calwatch wrote: Wed Jan 05, 2022 7:20 pm I want to report that, for my $140,000 in boxes ($90,000 for December 2022 and $50,000 in December 2023), I have $5,971 in paper gains I will have to pay taxes on. For the 2022 boxes I have a $4,484 paper gain that presumably would turn into a loss upon expiration at the end of the year, so an offsetting $4,484 or more capital loss at end of 2022. Just a risk to be aware of, especially if you need to massage income for ACA, EITC, or other purposes. This was generated using Gainskeeper on TD Ameritrade. You don't report the transactions individually since this is mark to market, you report it in one lump sum on Form 6781, but the individual details are available if you like.

Code: Select all

Security	Trans type	Qty	Open date	Adj cost	Close date	Adj proceeds	Gain adj	Adj ST gain($)	Adj LT gain($)	Adj OR gain($)
SPX Dec 15 2023 4000.0 Call*	Short MTM Sell	100	10/5/2021	104,876.00	12/31/2021	70,262.68		-13,845.33	-20,767.99	
SPX Dec 15 2023 4000.0 Put*	MTM Sell	100	10/5/2021	41,657.32	12/31/2021	29,250.00		-4,962.93	-7,444.39	
SPX Dec 15 2023 4500.0 Call*	MTM Sell	100	10/5/2021	41,262.32	12/31/2021	71,377.00		12,045.87	18,068.81	
SPX Dec 15 2023 4500.0 Put*	Short MTM Sell	100	10/5/2021	43,489.00	12/31/2021	61,881.68		7,357.07	11,035.61	
SPX Dec 16 2022 4000.0 Call*	Short MTM Sell	100	9/20/2021	91,800.00	12/31/2021	58,534.68		-13,306.13	-19,959.19	
SPX Dec 16 2022 4000.0 Call*	Short MTM Sell	100	9/24/2021	91,800.00	12/31/2021	66,007.68		-10,316.93	-15,475.39	
SPX Dec 16 2022 4000.0 Call*	Short MTM Sell	100	11/18/2021	91,800.00	12/31/2021	85,363.68		-2,574.53	-3,861.79	
SPX Dec 16 2022 4000.0 Put*	MTM Sell	100	9/20/2021	31,960.32	12/31/2021	16,900.00		-6,024.13	-9,036.19	
SPX Dec 16 2022 4000.0 Put*	MTM Sell	100	9/24/2021	26,290.32	12/31/2021	16,900.00		-3,756.13	-5,634.19	
SPX Dec 16 2022 4000.0 Put*	MTM Sell	100	11/18/2021	19,204.32	12/31/2021	16,900.00		-921.73	-1,382.59	
SPX Dec 16 2022 4300.0 Call*	MTM Sell	100	9/20/2021	39,166.32	12/31/2021	69,740.00		12,229.47	18,344.21	
SPX Dec 16 2022 4300.0 Call*	MTM Sell	100	9/24/2021	45,279.32	12/31/2021	69,740.00		9,784.27	14,676.41	
SPX Dec 16 2022 4300.0 Call*	MTM Sell	100	11/18/2021	62,586.32	12/31/2021	69,740.00		2,861.47	4,292.21	
SPX Dec 16 2022 4300.0 Put*	Short MTM Sell	100	9/20/2021	23,140.00	12/31/2021	42,386.68		7,698.67	11,548.01	
SPX Dec 16 2022 4300.0 Put*	Short MTM Sell	100	9/24/2021	23,140.00	12/31/2021	35,381.68		4,896.67	7,345.01	
SPX Dec 16 2022 4300.0 Put*	Short MTM Sell	100	11/18/2021	23,140.00	12/31/2021	26,196.68		1,222.67	1,834.01	
Thanks for the heads up.

Interest rates have moved up after your box trades. I guess this explains the paper gains.
My signature has been deleted.
sharukh
Posts: 634
Joined: Mon Jun 20, 2016 10:19 am

Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

Freebee34 wrote: Tue Nov 30, 2021 8:21 pm
sharukh wrote: Tue Nov 30, 2021 5:48 am
calwatch wrote: Wed Sep 22, 2021 11:52 pm
nalor511 wrote: Wed Sep 22, 2021 6:50 pm I can (roughly) understand it, but not well enough to execute it without a tutorial, and as far as I can tell there is no tutorial for doing this at say Schwab or fidelity. I'm not willing to use IB, but would love to do this 😋
On Fidelity and Ameritrade the box is identified as an iron condor, because there are four legs. It's fairly easy to do on Fidelity. Below is how to replicate the trade I listed above. Use the "new options experience" and select "iron condor" in the "more strategies" drop down.

Image

Note that, due to exchange and "proprietary index" fees, the actual amount received is off by a few bucks. This is how the actual trade looked on my trade confirmations on Ameritrade:

Image

Apparently Fidelity does not charge the "proprietary index" fees, which end up doubling the commission when you use Ameritrade or IB. So you may save a few bucks with Fidelity.
Hi calwatch,

Does Fidelity gives portfolio margin ?

IBKR portfolio maintenance margin is 17%, RegT maintenance margin is 25%

How much should one be worried about "Algorithm" of IBKR compared to Fidelity ?
I prefer IBKR, as it has lower margin requirements, so low chances of getting a margin call.(if the margin cash is withdrawn for say buying CD)
Does fidelity also have the same lower margin requirements ?

Thank you.
I have portfolio margin with fidelity. The process is a bit obtuse but you end up in the right spot. I think min equity goes down to 25% vs 15% for interactive brokers.
IIUC RegT is also 25%, So changing from RegT to portfolio margin with fidelity gives no benefit.
sharukh
Posts: 634
Joined: Mon Jun 20, 2016 10:19 am

Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

Chuck wrote: Fri Jul 16, 2021 10:42 pm FYI this works at any broker, not just IBKR. As long as you have level something option trading. I've been playing the low interest box game at etrade for years. I've never even bothered with the relatively not great margin rates.
Hi Chuck,

Did ETrade handle End of the year Mark to market properly ?
60/40 split of gains into long and short term ?
Updated new cost basis appropriately ?
Was that a portfolio margin account ?

Thank you.
sharukh
Posts: 634
Joined: Mon Jun 20, 2016 10:19 am

Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

calwatch wrote: Wed Jan 05, 2022 7:20 pm I want to report that, for my $140,000 in boxes ($90,000 for December 2022 and $50,000 in December 2023), I have $5,971 in paper gains I will have to pay taxes on. For the 2022 boxes I have a $4,484 paper gain that presumably would turn into a loss upon expiration at the end of the year, so an offsetting $4,484 or more capital loss at end of 2022. Just a risk to be aware of, especially if you need to massage income for ACA, EITC, or other purposes. This was generated using Gainskeeper on TD Ameritrade. You don't report the transactions individually since this is mark to market, you report it in one lump sum on Form 6781, but the individual details are available if you like.

Code: Select all

Security	Trans type	Qty	Open date	Adj cost	Close date	Adj proceeds	Gain adj	Adj ST gain($)	Adj LT gain($)	Adj OR gain($)
SPX Dec 15 2023 4000.0 Call*	Short MTM Sell	100	10/5/2021	104,876.00	12/31/2021	70,262.68		-13,845.33	-20,767.99	
SPX Dec 15 2023 4000.0 Put*	MTM Sell	100	10/5/2021	41,657.32	12/31/2021	29,250.00		-4,962.93	-7,444.39	
SPX Dec 15 2023 4500.0 Call*	MTM Sell	100	10/5/2021	41,262.32	12/31/2021	71,377.00		12,045.87	18,068.81	
SPX Dec 15 2023 4500.0 Put*	Short MTM Sell	100	10/5/2021	43,489.00	12/31/2021	61,881.68		7,357.07	11,035.61	
SPX Dec 16 2022 4000.0 Call*	Short MTM Sell	100	9/20/2021	91,800.00	12/31/2021	58,534.68		-13,306.13	-19,959.19	
SPX Dec 16 2022 4000.0 Call*	Short MTM Sell	100	9/24/2021	91,800.00	12/31/2021	66,007.68		-10,316.93	-15,475.39	
SPX Dec 16 2022 4000.0 Call*	Short MTM Sell	100	11/18/2021	91,800.00	12/31/2021	85,363.68		-2,574.53	-3,861.79	
SPX Dec 16 2022 4000.0 Put*	MTM Sell	100	9/20/2021	31,960.32	12/31/2021	16,900.00		-6,024.13	-9,036.19	
SPX Dec 16 2022 4000.0 Put*	MTM Sell	100	9/24/2021	26,290.32	12/31/2021	16,900.00		-3,756.13	-5,634.19	
SPX Dec 16 2022 4000.0 Put*	MTM Sell	100	11/18/2021	19,204.32	12/31/2021	16,900.00		-921.73	-1,382.59	
SPX Dec 16 2022 4300.0 Call*	MTM Sell	100	9/20/2021	39,166.32	12/31/2021	69,740.00		12,229.47	18,344.21	
SPX Dec 16 2022 4300.0 Call*	MTM Sell	100	9/24/2021	45,279.32	12/31/2021	69,740.00		9,784.27	14,676.41	
SPX Dec 16 2022 4300.0 Call*	MTM Sell	100	11/18/2021	62,586.32	12/31/2021	69,740.00		2,861.47	4,292.21	
SPX Dec 16 2022 4300.0 Put*	Short MTM Sell	100	9/20/2021	23,140.00	12/31/2021	42,386.68		7,698.67	11,548.01	
SPX Dec 16 2022 4300.0 Put*	Short MTM Sell	100	9/24/2021	23,140.00	12/31/2021	35,381.68		4,896.67	7,345.01	
SPX Dec 16 2022 4300.0 Put*	Short MTM Sell	100	11/18/2021	23,140.00	12/31/2021	26,196.68		1,222.67	1,834.01	
Hi,

Did any one see similar thing happen at interactive brokers, I don't see any thing like this in realized gain or loss, or change of cost basis

Thank you.
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whodidntante
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by whodidntante »

I just want to say that I love this thread. LOL
richardm
Posts: 49
Joined: Mon Nov 20, 2017 6:42 pm

Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by richardm »

sharukh wrote: Thu Jan 06, 2022 6:34 pm Did any one see similar thing happen at interactive brokers, I don't see any thing like this in realized gain or loss, or change of cost basis
My mark-to-market at the end of the year was pretty close to break-even. I sell the longest possible dated boxes, though. The rates are less volatile further out on the curve (generally).

That said, I think this person would "recover" the tax liability in later years, no? Their cost basis was effectively reset higher by the MTM.
sharukh
Posts: 634
Joined: Mon Jun 20, 2016 10:19 am

Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

calwatch wrote: Tue Oct 26, 2021 1:52 pm
spiyer99 wrote: Tue Oct 26, 2021 2:29 am Not sure if this has been covered before, but what do people think of this? https://www.greaterwrong.com/posts/8NSK ... tly-faster

The author talks about using a box spread in a CD. "After taxes and commissions, this increases annual returns on your entire portfolio by 0.2-0.5%, nearly risk-free." Is it really worth the risk though?

PS: long time lurker, first time poster.
I don't think there's anything wrong with this per se, but the juice gained from this is similar to other tactics like shifting accounts around, opening up accounts for the bank bonus, or credit card balance transfer arbitrage. Note that with a box spread in place, I would not recommend taking advantage of transfer bonuses just because of the risk of screwing it up in the ACAT process. I personally am using it for "lifecycle investing" in this current positive momentum cycle, cognizant of the risks involved.
Hi,

Which is better for lifecycle investing usecase:
Box of this year. Or box of long dated years.
1 year out or 2 years out or 3 years out or 4 years out

Thank you.
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