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

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inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

outofthebox wrote: Sun Apr 11, 2021 1:40 pmI mean, these short box spreads do not enable you to buy more equities (rather the opposite in my case), they just make the margin loan less expensive (or in my case quite attractive 8-) ).
Too attractive. It does seem too good to be true. What's the harm? Why not invest as usual, but take out these margin loans to make extra change?

What's the world come to? Gravity is real and when the virtual world meets the real world, some things are going to fall.

With Negative Rates, Homeowners in Europe Are Paid to Borrow
Covid-19 pushes benchmarks deeper into negative territory, widening the pool of mortgage holders who receive interest
https://www.wsj.com/articles/with-negat ... 1616664600
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kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

You know the market is going higher when the mass media CNBC clowns like craemer are pushing out bearish FUD articles calling for a market crash on "egregious" stock market valuations. lol, they've been saying that since 2008. Totally stupid. At sub-1% interest rates, this is the best time to leverage to the hilt. full disclosure, I'm all in. SPX heading to 5000 by EOY guaranteed courtesy of Papa Powell unlimited QE cheat codes. watch out for gang-busting Q2 earnings and revisions to the upside. buy now cuz when those mega yuuuge numbers come out, it'll be too late. buy the rumor, sell the news. melting-up, eat bear meat for breakfast, lunch and dinner. use bear fur for coats and bear skin for my high heels. you're welcome 😎
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outofthebox
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

inbox788 wrote: Sun Apr 11, 2021 1:53 pm Too attractive. It does seem too good to be true. What's the harm? Why not invest as usual, but take out these margin loans to make extra change?

What's the world come to? Gravity is real and when the virtual world meets the real world, some things are going to fall.

With Negative Rates, Homeowners in Europe Are Paid to Borrow
Covid-19 pushes benchmarks deeper into negative territory, widening the pool of mortgage holders who receive interest
https://www.wsj.com/articles/with-negat ... 1616664600
I agree. Most people do not grasp the effects of negative yields. It is crazy to think that some European countries' 10Y yields are negative!

I do not think it can go much lower, so I will most likely benefit from interest rate rises.
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outofthebox
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

There is also one catch in it - if you try and maximize the loans with negative interest rates:
You will pay interest rate to IB for any cash balance > 100k EUR (or any currency with negative interest rates) - the going rate at the moment is 0.885 %

But for my approach of lifecycle investing and using it for modest leverage in ETFs, it is perfect.
parval
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by parval »

What are your thoughts on avoiding/handling margin calls?

My understanding is if I buy SSO I can get 2x leverage and pay 1% expense with no risk of mc

With this method I can buy 2x SPY on margin and pay the 0.5% interest on boxes, but....

Is it the case if SPY plummets and I get margin-called, I might be forced to pay back the boxes early, and depending on ask/bid incur a much higher interest rate?
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outofthebox
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

parval wrote: Mon Apr 12, 2021 10:38 am What are your thoughts on avoiding/handling margin calls?

My understanding is if I buy SSO I can get 2x leverage and pay 1% expense with no risk of mc

With this method I can buy 2x SPY on margin and pay the 0.5% interest on boxes, but....

Is it the case if SPY plummets and I get margin-called, I might be forced to pay back the boxes early, and depending on ask/bid incur a much higher interest rate?
I think there are two scenarios regarding margin calls:
1) Huge intra-day move (-33% with 2x SPY on margin): Biggest problem IMO for this strategy
2) Bear market over several weeks/months/years: You could rebalance on the move down to get close to the performance of a 2x LETF --> I am more relaxed about this scenario due to the possibility to rebalance more frequently in a bear market.

The other problem is indeed what happens to the box spreads:
Someone on Reddit wrote to mark them as "Liquidate last" - but this option is greyed out for my box spreads, so maybe it was fixed and their algorithm would automatically liquidate these boxes last. But this is indeed something to keep an eye on...
inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

outofthebox wrote: Mon Apr 12, 2021 5:50 amThere is also one catch in it - if you try and maximize the loans with negative interest rates:
You will pay interest rate to IB for any cash balance > 100k EUR (or any currency with negative interest rates) - the going rate at the moment is 0.885 %
LOL! Pay the bank to trust them with my money and use it and profit from it. We've so conditioned rightly or wrongly that it's so foreign to think more like the Swiss numbered banks accounts that just getting your monies back that used to involve physically getting there just to preserve cash was enough. But I guess there's gold, diamonds and Bitcoin for that today and Switzerland isn't all that it used to be.

Anyway, the 101 box trades went through and used up $85k ($800/box) in Buying Power and Net Liq Value went down $8-9k ($85/box). I didn't understand the difference at first, but I did this in the IRA account not the Margin account where the difference is more like $5000/box. My margin on the IRA with $222k Net Liq Value is now over $4M! Would this work in a real account? Anyway, I still don't know where my "loan cash" is sitting and how to get it out of the account without a margin call, and further complicated it by using an IRA account.

Please don't do this in real life. I suspect the simulator wasn't designed for this situation. FWIW, the simulator filled the one $392 limit order at $392.40 and expired the 100 market order from previous day. I don't understand why it is different from the other market order entered last weekend that did execute. But I re-entered it this morning and got 100 fills at 391.70.

[One more observation. In a 200k IRA account with $4M margin, one moment it showed $11k P/L Open (0.3%) (of the $4M I assume, cause it's more than 5% of 200k). Suddenly, it went near zero, then -$6k!, and fluctuating, now near zero. As the legs of the box are updating in real time, the real time position value fluxtuates along with it and I observed Net Liq Value $211k to 228k and I'm sure it went outside that at times) This must be how 20X leverage feels like, and I don't like it, even though the box is supposed to be zero or low risk.]
parval
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by parval »

outofthebox wrote: Mon Apr 12, 2021 10:55 am
parval wrote: Mon Apr 12, 2021 10:38 am What are your thoughts on avoiding/handling margin calls?

My understanding is if I buy SSO I can get 2x leverage and pay 1% expense with no risk of mc

With this method I can buy 2x SPY on margin and pay the 0.5% interest on boxes, but....

Is it the case if SPY plummets and I get margin-called, I might be forced to pay back the boxes early, and depending on ask/bid incur a much higher interest rate?
I think there are two scenarios regarding margin calls:
1) Huge intra-day move (-33% with 2x SPY on margin): Biggest problem IMO for this strategy
2) Bear market over several weeks/months/years: You could rebalance on the move down to get close to the performance of a 2x LETF --> I am more relaxed about this scenario due to the possibility to rebalance more frequently in a bear market.

The other problem is indeed what happens to the box spreads:
Someone on Reddit wrote to mark them as "Liquidate last" - but this option is greyed out for my box spreads, so maybe it was fixed and their algorithm would automatically liquidate these boxes last. But this is indeed something to keep an eye on...
Ah thanks for your thoughts. I think for just leveraging SPY this might not be worth it, since the LETF ERs are quite low already.

Maybe better to cash out the boxes and yield farm in defi :)
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outofthebox
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

Yes, I have also thought about using simply a SPY LETF and it was a close call - but I decided against it. Due to the daily rebalancing and less flexibility (with this solution right now, I can invest in a Vanguard-All-World fund + maybe some EM ETF and can realize an individual leverage factor of 1.5) + there are not many UCITS leveraged funds for Europeans to choose from.
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

parval wrote: Mon Apr 12, 2021 1:48 pm
Ah thanks for your thoughts. I think for just leveraging SPY this might not be worth it, since the LETF ERs are quite low already.
What is the lowest LETF ER right now?
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cos
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by cos »

comeinvest wrote: Mon Apr 12, 2021 8:12 pm
parval wrote: Mon Apr 12, 2021 1:48 pm
Ah thanks for your thoughts. I think for just leveraging SPY this might not be worth it, since the LETF ERs are quite low already.
What is the lowest LETF ER right now?
Out of all the ones worth considering, UPRO has an ER of 0.93%. I'm reluctant to call that "low," but it's good enough for me.
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unclescrooge
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by unclescrooge »

kellykline wrote: Tue Mar 30, 2021 5:47 pm The key to the strategy is to pick the one that expires the longest on European style options. Otherwise you will not be able to get the rates below 1%. Which is the whole point of the strategy. Hope someone who’s done it before I can shed light on how to do it properly
Doesn't IB charge 1.07% for portfolio margin? How much leverage are you getting on this box disc loan?
Semantics
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Semantics »

unclescrooge wrote: Tue Apr 13, 2021 12:11 am
kellykline wrote: Tue Mar 30, 2021 5:47 pm The key to the strategy is to pick the one that expires the longest on European style options. Otherwise you will not be able to get the rates below 1%. Which is the whole point of the strategy. Hope someone who’s done it before I can shed light on how to do it properly
Doesn't IB charge 1.07% for portfolio margin? How much leverage are you getting on this box disc loan?
For amounts borrowed between 100k-1M. The first 100k is 1.57%, I expect the majority of people experimenting with this are in that range. As per earlier in the thread, people are getting rates of around 0.5-0.7% depending on the duration.

The other thing is the box spread turns into a capital loss when you close it, which gets better tax treatment in the US than margin interest since the latter requires itemizing and spending the loan on securities (and excludes those with tax-exempt distributions like munis).

80+ bps is nothing to sneeze at!
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kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

unclescrooge wrote: Tue Apr 13, 2021 12:11 am
kellykline wrote: Tue Mar 30, 2021 5:47 pm The key to the strategy is to pick the one that expires the longest on European style options. Otherwise you will not be able to get the rates below 1%. Which is the whole point of the strategy. Hope someone who’s done it before I can shed light on how to do it properly
Doesn't IB charge 1.07% for portfolio margin? How much leverage are you getting on this box disc loan?
My leverage ratio is 10x right now. :D
I told you, new new new bull market, unstoppable! TQQQ

IB charges 1.07%, but that rate increases as the benchmark (treasury) rate increases. My boxes expire at the end of 2023, so my sub-1% rate loans are fixed until expiry.
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kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

unclescrooge wrote: Tue Apr 13, 2021 12:11 am
kellykline wrote: Tue Mar 30, 2021 5:47 pm The key to the strategy is to pick the one that expires the longest on European style options. Otherwise you will not be able to get the rates below 1%. Which is the whole point of the strategy. Hope someone who’s done it before I can shed light on how to do it properly
Doesn't IB charge 1.07% for portfolio margin? How much leverage are you getting on this box disc loan?
My leverage ratio is 10x right now. :D
I told you, new new new bull market, unstoppable! TQQQ. taking some profits off lol, paying off the loan with profits!

IB charges 1.07%, but that rate increases as the benchmark (treasury) rates increase. My boxes expire at the end of 2023, so my sub-1% rate loans are fixed until expiry.
Last edited by kellykline on Tue Apr 13, 2021 12:17 pm, edited 4 times in total.
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outofthebox
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

kellykline wrote: Tue Apr 13, 2021 10:01 am My leverage ratio is 10x right now. :D
I told you, new new new bull market, unstoppable! TQQQ. taking some profits off lol, paying off the loan with profits!
Wait, what? :shock:

What is your margin cushion / initial margin? Must be very close to NLV?
inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

outofthebox wrote: Tue Apr 13, 2021 10:04 am
kellykline wrote: Tue Apr 13, 2021 10:01 am My leverage ratio is 10x right now. :D
I told you, new new new bull market, unstoppable! TQQQ. taking some profits off lol, paying off the loan with profits!
Wait, what? :shock:

What is your margin cushion / initial margin? Must be very close to NLV?
Are you including the 3X from the TQQQ and the 4X from the margin loans (25% margin requirement)? That's potentially about 12X leverage...just remember, leverage cuts both ways.
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kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

inbox788 wrote: Tue Apr 13, 2021 1:07 pm
outofthebox wrote: Tue Apr 13, 2021 10:04 am
kellykline wrote: Tue Apr 13, 2021 10:01 am My leverage ratio is 10x right now. :D
I told you, new new new bull market, unstoppable! TQQQ. taking some profits off lol, paying off the loan with profits!
Wait, what? :shock:

What is your margin cushion / initial margin? Must be very close to NLV?
Are you including the 3X from the TQQQ and the 4X from the margin loans (25% margin requirement)? That's potentially about 12X leverage...just remember, leverage cuts both ways.
The Feds are throwing money at you, why wouldn't you leverage? This is NOT the time to be safe like a boomer, you'll end up losing money. Who buys bonds these days lol! Unlimited QE hack, keep on printing!!!!
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outofthebox
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

kellykline wrote: Tue Apr 13, 2021 1:14 pm
inbox788 wrote: Tue Apr 13, 2021 1:07 pm Are you including the 3X from the TQQQ and the 4X from the margin loans (25% margin requirement)? That's potentially about 12X leverage...just remember, leverage cuts both ways.
The Feds are throwing money at you, why wouldn't you leverage? This is NOT the time to be safe like a boomer, you'll end up losing money. Who buys bonds these days lol! Unlimited QE hack, keep on printing!!!!
Which margin cushion does IB display to you? Just out of curiosity, to know what is possible...

P.S.: For him (https://www.reddit.com/user/Adderalin/), who posted a lot about using box spreads for leverage, it did not go that well :wink:
secondopinion
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by secondopinion »

kellykline wrote: Tue Apr 13, 2021 1:14 pm
inbox788 wrote: Tue Apr 13, 2021 1:07 pm
outofthebox wrote: Tue Apr 13, 2021 10:04 am
kellykline wrote: Tue Apr 13, 2021 10:01 am My leverage ratio is 10x right now. :D
I told you, new new new bull market, unstoppable! TQQQ. taking some profits off lol, paying off the loan with profits!
Wait, what? :shock:

What is your margin cushion / initial margin? Must be very close to NLV?
Are you including the 3X from the TQQQ and the 4X from the margin loans (25% margin requirement)? That's potentially about 12X leverage...just remember, leverage cuts both ways.
The Feds are throwing money at you, why wouldn't you leverage? This is NOT the time to be safe like a boomer, you'll end up losing money. Who buys bonds these days lol! Unlimited QE hack, keep on printing!!!!
This is the true example of stock market craze; leveraging to extreme multipliers. If I recall right, this happened in the late 1920s; and Lehman Brothers I think had high leverage as well in 2007. I am not leveraged; my guess is that I will pick up the loose change when all of the crazy leverage speculators lose all their money and have to sell on extreme discounts. I am waiting for them to learn the hard way.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
jarjarM
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by jarjarM »

secondopinion wrote: Tue Apr 13, 2021 5:04 pm
kellykline wrote: Tue Apr 13, 2021 1:14 pm
inbox788 wrote: Tue Apr 13, 2021 1:07 pm
outofthebox wrote: Tue Apr 13, 2021 10:04 am
kellykline wrote: Tue Apr 13, 2021 10:01 am My leverage ratio is 10x right now. :D
I told you, new new new bull market, unstoppable! TQQQ. taking some profits off lol, paying off the loan with profits!
Wait, what? :shock:

What is your margin cushion / initial margin? Must be very close to NLV?
Are you including the 3X from the TQQQ and the 4X from the margin loans (25% margin requirement)? That's potentially about 12X leverage...just remember, leverage cuts both ways.
The Feds are throwing money at you, why wouldn't you leverage? This is NOT the time to be safe like a boomer, you'll end up losing money. Who buys bonds these days lol! Unlimited QE hack, keep on printing!!!!
This is the true example of stock market craze; leveraging to extreme multipliers. If I recall right, this happened in the late 1920s; and Lehman Brothers I think had high leverage as well in 2007. I am not leveraged; my guess is that I will pick up the loose change when all of the crazy leverage speculators lose all their money and have to sell on extreme discounts. I am waiting for them to learn the hard way.
So if late Feb/early Mar happened again, then margin call happens. I'm not sure if kellykline is serious though.
secondopinion
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by secondopinion »

jarjarM wrote: Tue Apr 13, 2021 5:08 pm
secondopinion wrote: Tue Apr 13, 2021 5:04 pm
kellykline wrote: Tue Apr 13, 2021 1:14 pm
inbox788 wrote: Tue Apr 13, 2021 1:07 pm
outofthebox wrote: Tue Apr 13, 2021 10:04 am

Wait, what? :shock:

What is your margin cushion / initial margin? Must be very close to NLV?
Are you including the 3X from the TQQQ and the 4X from the margin loans (25% margin requirement)? That's potentially about 12X leverage...just remember, leverage cuts both ways.
The Feds are throwing money at you, why wouldn't you leverage? This is NOT the time to be safe like a boomer, you'll end up losing money. Who buys bonds these days lol! Unlimited QE hack, keep on printing!!!!
This is the true example of stock market craze; leveraging to extreme multipliers. If I recall right, this happened in the late 1920s; and Lehman Brothers I think had high leverage as well in 2007. I am not leveraged; my guess is that I will pick up the loose change when all of the crazy leverage speculators lose all their money and have to sell on extreme discounts. I am waiting for them to learn the hard way.
So if late Feb/early Mar happened again, then margin call happens. I'm not sure if kellykline is serious though.
With 10x leverage and all like comments, margin calls are really easy to have happen at those multipliers. I certainly hope that this is not the case for their sake. If not, then it is over for them eventually.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

secondopinion wrote: Tue Apr 13, 2021 5:12 pm
jarjarM wrote: Tue Apr 13, 2021 5:08 pm
secondopinion wrote: Tue Apr 13, 2021 5:04 pm
kellykline wrote: Tue Apr 13, 2021 1:14 pm
inbox788 wrote: Tue Apr 13, 2021 1:07 pm

Are you including the 3X from the TQQQ and the 4X from the margin loans (25% margin requirement)? That's potentially about 12X leverage...just remember, leverage cuts both ways.
The Feds are throwing money at you, why wouldn't you leverage? This is NOT the time to be safe like a boomer, you'll end up losing money. Who buys bonds these days lol! Unlimited QE hack, keep on printing!!!!
This is the true example of stock market craze; leveraging to extreme multipliers. If I recall right, this happened in the late 1920s; and Lehman Brothers I think had high leverage as well in 2007. I am not leveraged; my guess is that I will pick up the loose change when all of the crazy leverage speculators lose all their money and have to sell on extreme discounts. I am waiting for them to learn the hard way.
So if late Feb/early Mar happened again, then margin call happens. I'm not sure if kellykline is serious though.
With 10x leverage and all like comments, margin calls are really easy to have happen at those multipliers. I certainly hope that this is not the case for their sake. If not, then it is over for them eventually.
LOL you just mad that you’re not making any money with your conservative plays! I’m already up so much on TQQQ my rapidly expanding asset value is paying off my 10x leverage! I told you market is gonna rally, u just didn’t listen! :D :D :D :moneybag :moneybag :moneybag :moneybag :moneybag
secondopinion
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by secondopinion »

kellykline wrote: Wed Apr 14, 2021 6:41 am
secondopinion wrote: Tue Apr 13, 2021 5:12 pm
jarjarM wrote: Tue Apr 13, 2021 5:08 pm
secondopinion wrote: Tue Apr 13, 2021 5:04 pm
kellykline wrote: Tue Apr 13, 2021 1:14 pm

The Feds are throwing money at you, why wouldn't you leverage? This is NOT the time to be safe like a boomer, you'll end up losing money. Who buys bonds these days lol! Unlimited QE hack, keep on printing!!!!
This is the true example of stock market craze; leveraging to extreme multipliers. If I recall right, this happened in the late 1920s; and Lehman Brothers I think had high leverage as well in 2007. I am not leveraged; my guess is that I will pick up the loose change when all of the crazy leverage speculators lose all their money and have to sell on extreme discounts. I am waiting for them to learn the hard way.
So if late Feb/early Mar happened again, then margin call happens. I'm not sure if kellykline is serious though.
With 10x leverage and all like comments, margin calls are really easy to have happen at those multipliers. I certainly hope that this is not the case for their sake. If not, then it is over for them eventually.
LOL you just mad that you’re not making any money with your conservative plays! I’m already up so much on TQQQ my rapidly expanding asset value is paying off my 10x leverage! I told you market is gonna rally, u just didn’t listen! :D :D :D :moneybag :moneybag :moneybag :moneybag :moneybag
Mad, no. I get the return distribution based on my risk taken; you get return distribution based on your risk taken. Just understand that the nature of your risk is far beyond what I will take; and history backs my statement that margin calls under that leverage is likely (even to the point where you could owe multiples of your present portfolio value). The possibility of owing 2x to 3x your portfolio value in debt is real, not fake. Margin calls and liquidation will not save you from owing money.

No amount of positive returns will counteract a 100+% loss.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

jarjarM wrote: Tue Apr 13, 2021 5:08 pmSo if late Feb/early Mar happened again, then margin call happens. I'm not sure if kellykline is serious though.
Are you wearing swimming trunks?
https://www.goodreads.com/quotes/109034 ... -tide-goes
inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

secondopinion wrote: Wed Apr 14, 2021 11:57 amMad, no. I get the return distribution based on my risk taken; you get return distribution based on your risk taken. Just understand that the nature of your risk is far beyond what I will take; and history backs my statement that margin calls under that leverage is likely (even to the point where you could owe multiples of your present portfolio value). The possibility of owing 2x to 3x your portfolio value in debt is real, not fake. Margin calls and liquidation will not save you from owing money.

No amount of positive returns will counteract a 100+% loss.
I'm envious of some of the folks that have made it big in tech bets, biotech, bitcoin, and others, but I'm content that I'm doing ok and steadily growing with what I believe to be lower risk. And I'm pessimistic about my ability to time and select these big bets. Chances are I'd be late to the party or pick the wrong horse.

Anyway, there's leverage with unlimited downside (symmetric; shorting a stock) and limited downside (asymmetric; using options). Returns are better with symmetric leverage, since you pay a premium for the downside protection or limitation.

You can't lose more than you put in with TQQQ (asymmetric) or if you buy puts. This box loan appears to expose one to symmetric risk if it goes haywire. Exceeding margin is what gets you in trouble and owing money, so if margin calls are timed and executed correctly, the "investor" should go broke before going into (too much) debt. It's not clear to me how these box spread loans enable more margin, but it seems to alter this failsafe.
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outofthebox
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

outofthebox wrote: Tue Apr 13, 2021 1:49 pm
kellykline wrote: Tue Apr 13, 2021 1:14 pm
inbox788 wrote: Tue Apr 13, 2021 1:07 pm Are you including the 3X from the TQQQ and the 4X from the margin loans (25% margin requirement)? That's potentially about 12X leverage...just remember, leverage cuts both ways.
The Feds are throwing money at you, why wouldn't you leverage? This is NOT the time to be safe like a boomer, you'll end up losing money. Who buys bonds these days lol! Unlimited QE hack, keep on printing!!!!
Which margin cushion does IB display to you? Just out of curiosity, to know what is possible...
@kellykline:
It was a serious question, I do not know why you are not answering? Or is this all just a joke/trolling?
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outofthebox
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

inbox788 wrote: Wed Apr 14, 2021 12:26 pm I'm envious of some of the folks that have made it big in tech bets, biotech, bitcoin, and others, but I'm content that I'm doing ok and steadily growing with what I believe to be lower risk. And I'm pessimistic about my ability to time and select these big bets. Chances are I'd be late to the party or pick the wrong horse.
There is a lot of survivorship bias involved, looking at gain posts for example at WSB on Reddit.

I think, taking the steady path, like you say, maybe with modest leverage (1.2-1.5x), goes a long way...
Last edited by outofthebox on Wed Apr 14, 2021 1:09 pm, edited 1 time in total.
jarjarM
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by jarjarM »

inbox788 wrote: Wed Apr 14, 2021 12:14 pm
jarjarM wrote: Tue Apr 13, 2021 5:08 pmSo if late Feb/early Mar happened again, then margin call happens. I'm not sure if kellykline is serious though.
Are you wearing swimming trunks?
https://www.goodreads.com/quotes/109034 ... -tide-goes
Let me check :o
Fxmove88
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

kellykline wrote: Mon Apr 05, 2021 7:26 pm HARUMPFH!!!!

My box spread hasn't been filled for days!!!

SELL 1 SPX CALL 3800
BUY 1 SPX CALL 4200
SELL 1 SPX PUT 4200
BUY 1 SPX PUT 3800

Dec 2023 Expiry

My offer price: $391.
Somebody buy my box!!!
Hi, I just followed this thread.
I was wondering if the box's legs were like these instead:

BUY 1 SPX CALL 3800
SELL 1 SPX CALL 4200
BUY 1 SPX PUT 4200
SELL 1 SPX PUT 3800

Would it achieve the same thing selling the box?
i.e. the Bid and Ask is a positive number and it would be a Credit of a positive number if one sells the box?

Would OP's Box legs result in negative Bids and Asks? and would it be a Debit of a negative number for selling the box?
Is it the same thing? Would it result in a faster fill?
Last edited by Fxmove88 on Thu Jun 17, 2021 6:38 am, edited 2 times in total.
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firebirdparts
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by firebirdparts »

Well, if you do that, you'd be the buyer, because you have to buy the expensive legs, the 3800 call and the 4200 put are more expensive. You'd have to pay (let's just say) the $39,000 to buy the box and then when it expired the person would owe you $40,000. So you'd make $1000 profit when it ended.
This time is the same
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

firebirdparts wrote: Thu Jun 17, 2021 7:14 am Well, if you do that, you'd be the buyer, because you have to buy the expensive legs, the 3800 call and the 4200 put are more expensive. You'd have to pay (let's just say) the $39,000 to buy the box and then when it expired the person would owe you $40,000. So you'd make $1000 profit when it ended.
In my experience I cannot currently buy a box spread with a positive interest rate to park cash, i.e. the buy/ask spread is too high in relation to the low interest rate environment. I heard others did that, but it must have been at a time of higher interest rates.

This also means the midpoint / mark price is close to the risk free rate, not 0.3-0.5% higher like the implied financing rate for futures. Why that so is, I don't know, I'm still trying to wrap my head around this.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by klaus14 »

Tingting1013 wrote: Thu Apr 01, 2021 4:30 pm
UberGrub wrote: Thu Apr 01, 2021 4:23 pm
langlands wrote: Thu Apr 01, 2021 4:15 pm
Tingting1013 wrote: Thu Apr 01, 2021 2:58 pm
kellykline wrote: Thu Apr 01, 2021 2:23 pm

So my box was filled at $24.50. But it doesn't do anything to my margin??? It's not like I have additional buying power. Margins are the same minus the amount paid for the loan. What is this scam, totally bs!!!
Lol.

Seems like a lot of work for not that much marginal benefit.

IB offers Straight margin at 1%
Well the benefit seems to be about 0.3% which I think is non-negligible. Assuming there are no down sides to a box spread vs. IBKR margin, it's probably worth spending a couple days figuring out how it works. It seems like something you need to rollover at most once a year.
How do you figure 0.3%? The IBKR margin rate is 1.56% for anything under $100K. And a box spread is about 0.5% in my (limited) experience, so we're talking about a benefit >1%. And the box spread is fully tax-deductible without a need to itemize on top of it.
1.06% if you sign up for an account here (and you should)

https://www.interactivebrokers.com/en/? ... nr=stkbrks
woow, thanks for sharing.
do you know if this is only for pro?

i already have ibkr account but i'll apply for a new one and transfer assets :D
My investment algorithm: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=351899&p=6112869#p6112869
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

1.06% if you sign up for an account here (and you should)
There is no time limitation? I.e. those who sign up with this link will have the lower interest rates forever? Did anybody sign up, is there more fineprint in the process? Unfortunately it says "new customers" i.e. adding an account or cancelling / signing up again (probably) won't work.
Fxmove88
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

firebirdparts wrote: Thu Jun 17, 2021 7:14 am Well, if you do that, you'd be the buyer, because you have to buy the expensive legs, the 3800 call and the 4200 put are more expensive. You'd have to pay (let's just say) the $39,000 to buy the box and then when it expired the person would owe you $40,000. So you'd make $1000 profit when it ended.
I merely followed on the OCC write up on Box Spread financing.
https://www.optionseducation.org/refere ... -cash.aspx
A Box spread is a combination of a Bull Call Spread and a Bear Put Spread.
When I sell the Box, I am actually selling the more expensive 3800 call and 4200 put.
And it is a much easier filled at least on my demo account than the other way around which was quoted minus number sometimes.
First I do it slightly 3/4 toward the ask position, and if I don't get filled then I move it down a point at a time to get the box filled.

But I think the reverse is also quite alright. It's just harder to be filled on my IBKR demo account.

I have not used it on my account as it is quite risky to do a box on IBKR. Need to find a broker that does not do auto-liquidation.

Use different strikes/maturity on different boxes as some of the legs may cancel each other if we are not careful.
Last edited by Fxmove88 on Sun Jun 20, 2021 4:26 am, edited 11 times in total.
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kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

Fxmove88 wrote: Sat Jun 19, 2021 8:38 am
firebirdparts wrote: Thu Jun 17, 2021 7:14 am Well, if you do that, you'd be the buyer, because you have to buy the expensive legs, the 3800 call and the 4200 put are more expensive. You'd have to pay (let's just say) the $39,000 to buy the box and then when it expired the person would owe you $40,000. So you'd make $1000 profit when it ended.
I merely followed on the OCC write up on Box Spread financing.
A Box spread is basically a combination of a Bull Call Spread and a Bear Put Spread.
And it is a much easier filled at least on my demo account than the other way around which was quoted minus number sometimes.
Why do u ppl do this omg :) y’all like high risk low returns I guess lmao! Wait till it blows up ur account for a measly sub zero return.

TQQQ on free interest margin FTW! More than 10x my money on TQQQ, almost risk free!
Last edited by kellykline on Sat Jun 19, 2021 8:46 am, edited 2 times in total.
Fxmove88
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

[Quoted post removed by moderator oldcomputerguy]


You really have to be careful in trading options with IBKR. It's auto-liquidation algorithm has wrecked some accounts having option spreads positions.

You need to set up "last liquidation" on your boxes though this is not a guarantee, as some market glitch could messed up your box.

Please read the following:
https://www.foxnews.com/politics/obama- ... rket-swing

That event caused somedudetrader's Debit Put Spreads to be liquidated
https://www.elitetrader.com/et/threads/ ... es.198144/
p.s.
As it turned out this guy had a margin problem. not due to the market glitch.
https://www.elitetrader.com/et/threads/ ... 44/page-30
Last edited by Fxmove88 on Sat Jun 19, 2021 12:53 pm, edited 2 times in total.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

there are so many problems with spreads being liquidated IBKR for non market glitch event.
due to thin trading or some rogue quote:
https://www.elitetrader.com/et/threads/ ... 064/page-8
https://www.elitetrader.com/et/threads/ ... ss.210359/
https://www.optionsbro.com/interactive- ... s-trading/
Fxmove88
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

IBKR Margin requirement for shorting the box <MAX (1.02 x cost to close, Long Call Strike - Short Call Strike)>.
Cost to close = Amount of the loan?
https://www.interactivebrokers.com/en/index.php?f=26660

I tried selling ESTX50 box on a demo account. Borrowed Euro3,000.- got credited with Euro3,037.-
Just like these folks
https://www.wsj.com/articles/with-negat ... 1616664600
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by firebirdparts »

Fxmove88 wrote: Sat Jun 19, 2021 8:38 am
firebirdparts wrote: Thu Jun 17, 2021 7:14 am Well, if you do that, you'd be the buyer, because you have to buy the expensive legs, the 3800 call and the 4200 put are more expensive. You'd have to pay (let's just say) the $39,000 to buy the box and then when it expired the person would owe you $40,000. So you'd make $1000 profit when it ended.
I merely followed on the OCC write up on Box Spread financing.
https://www.optionseducation.org/refere ... -cash.aspx
A Box spread is a combination of a Bull Call Spread and a Bear Put Spread.
When I sell the Box, I am actually selling the more expensive 3800 call and 4200 put.
And it is a much easier filled at least on my demo account than the other way around which was quoted minus number sometimes.
First I do it slightly 3/4 toward the ask position, and if I don't get filled then I move it down a point at a time to get the box filled.

But I think the reverse Box (Bear Call Spread and Bull Put Spread) is also quite alright. It's just harder to be filled on my IBKR demo account.

I have not used it on my account as it is quite risky to do a box on IBKR. Need to find a broker that does not do auto-liquidation.

Use different strikes/maturity on different boxes as some of the legs may cancel each other if we are not careful.
Sounds like you have it figured out,
This time is the same
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Adenovir »

kellykline wrote: Fri Apr 02, 2021 5:26 pm
inbox788 wrote: Fri Apr 02, 2021 4:24 pm
kellykline wrote: Fri Apr 02, 2021 5:02 amThx. So when your box is about to expire, what do you do with it? Just let it expire? I’ll keep this box but am thinking 3 years later, what do I do so as to not get screwed by IBKR. I’ve read somewhere that there are special rules when there’s 30 days left to expiry...
Not just in the last 30 days, but anytime, you might get assigned. Depends on how far in or out of the money and close to worthless the short option premium gets.
wait.. but these are European options! I meant the SPX boxes, only European options. Don't want to end up like that WSB guy with the infinite money trick. He was trying to channel Jay Powell brrrr and got rammed by RobbingHood. :P
You mean this guy.. 1R0NYMAN? Worth watching the video with sound on.
https://www.reddit.com/r/wallstreetbets ... &context=3
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by nalor511 »

Fxmove88 wrote: Sat Jun 19, 2021 9:46 am there are so many problems with spreads being liquidated IBKR for non market glitch event.
due to thin trading or some rogue quote:
https://www.elitetrader.com/et/threads/ ... 064/page-8
https://www.elitetrader.com/et/threads/ ... ss.210359/
https://www.optionsbro.com/interactive- ... s-trading/
Would be great if some smart informed person could write a tutorial on how to use boxes to get sub 1% loan rates at non-liquidatey brokers like, say, Fidelity or Vanguard, assuming this is possible at those places
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by langlands »

nalor511 wrote: Sat Jun 19, 2021 4:42 pm
Fxmove88 wrote: Sat Jun 19, 2021 9:46 am there are so many problems with spreads being liquidated IBKR for non market glitch event.
due to thin trading or some rogue quote:
https://www.elitetrader.com/et/threads/ ... 064/page-8
https://www.elitetrader.com/et/threads/ ... ss.210359/
https://www.optionsbro.com/interactive- ... s-trading/
Would be great if some smart informed person could write a tutorial on how to use boxes to get sub 1% loan rates at non-liquidatey brokers like, say, Fidelity or Vanguard, assuming this is possible at those places
I'm not that person, but just want to point out that you want to do this with futures European options, not SPY American options and you want to use portfolio margin. So it would have to be at some place like TDAmeritrade. Neither Fidelity nor Vanguard supports futures trading as far as I know.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

another story on liquidation of $500k Box for short of $2k intraday shortage, with respond from an IB rep pointing to the Box spread's inherent "interest rate risk" I assume in a declining interest rate environment.

https://www.elitetrader.com/et/threads/ ... ory.63810/
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by ivgrivchuck »

Reading this and related threads has been highly informative, but I don't think that this is for me...

Taking 2M put/call positions to get a 50k low interest loan just goes against all common sense risk management.

I can see that in theory all these positions balance each other nicely, but if any of the positions is liquidated for whatever reason, it is a nightmare. Also plenty of examples people getting margin called and liquidated in a very unfavorable way.

Maybe if you are a highly experienced option trader, this might be for you, but for an amateur, hard to recommend.
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comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

Fxmove88 wrote: Sun Jun 20, 2021 9:26 am another story on liquidation of $500k Box for short of $2k intraday shortage, with respond from an IB rep pointing to the Box spread's inherent "interest rate risk" I assume in a declining interest rate environment.

https://www.elitetrader.com/et/threads/ ... ory.63810/
That thread was from 15 years ago. I read the entire thread. To me, IB's policy sounds reasonable, except that their auto-liquidation algo liquidated individual legs instead of the entire box. In a comment in 2006, they said they were working on this. I don't know if they implemented the change within 15 years, but I hope so. Other than that, I think it's very hard to get even close to a 50:1 gross position value, if you are halfway smart in choosing your box spread strike prices.

I also don't see how a declining interest rate environment would lead to margin calls in a portfolio reasonably leveraged with box spreads, unless you had extreme leverage ratios to begin with.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by mutedbytes »

A random thought... would a short box spread with portfolio margin allow one to convert otherwise unfavorable loans for more favorable termed leveraged investing? More thought experiment than actual consideration of employing such a crazy scheme but suppose for a young lifecycle investor:

1) Borrow X amount at some unfavorable rate from external lender (personal loan, HELOC, whatever)
2) Deposit and invest with access to portfolio margin
3) Short box with exceptional rate
4) Withdraw cash to immediately repay external loan

Mechanically, does this work? Where does this break down (besides the inherent risk of borrowing to invest and maintenance of the scheme etc etc)?
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Raraculus »

mutedbytes wrote: Wed Jun 23, 2021 5:38 pm1) Borrow X amount at some unfavorable rate from external lender (personal loan, HELOC, whatever)
2) Deposit and invest with access to portfolio margin
3) Short box with exceptional rate
4) Withdraw cash to immediately repay external loan

Mechanically, does this work? Where does this break down (besides the inherent risk of borrowing to invest and maintenance of the scheme etc etc)?
I like the way you think. However, I think you're not allowed to withdraw 100% of the short box to immediately pay off the external loan?
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by firebirdparts »

mutedbytes wrote: Wed Jun 23, 2021 5:38 pm A random thought... would a short box spread with portfolio margin allow one to convert otherwise unfavorable loans for more favorable termed leveraged investing? More thought experiment than actual consideration of employing such a crazy scheme but suppose for a young lifecycle investor:

1) Borrow X amount at some unfavorable rate from external lender (personal loan, HELOC, whatever)
2) Deposit and invest with access to portfolio margin
3) Short box with exceptional rate
4) Withdraw cash to immediately repay external loan

Mechanically, does this work? Where does this break down (besides the inherent risk of borrowing to invest and maintenance of the scheme etc etc)?
It would work, but you don't need to, I don't think. What this thread is about is you just omit step 1, 2, and 4. The end result, with you having whatever, $50,000 in cash in your brokerage account, to invest in whatever you like, is the same.

If you need to because of some form of margin requirements, then sure, you could do it.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by firebirdparts »

By the way, I got early assigned this morning. I would never borrow money, but I had a covered call that was assigned today. It does happen. It didn't appear to be a wise thing to do for the person who did it. Maybe I don't understand what they wanted to do.

I can see where, on these long dated options, they are not as liquid as you might like. Maybe once in a while somebody just executes one because it's not selling for the price it should.
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