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

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Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

langlands wrote: Thu Apr 01, 2021 7:34 pm
kellykline wrote: Thu Apr 01, 2021 7:25 pm ...
Did you see my other post? You need portfolio margin to reduce maintenance margin on your box spread.
Except when I used the Portfolio Margin Demo in IBKR, it made my numbers worse.

Current / With Portfolio Margin
Margin 24,600.00 USD / 22,600.00 USD
Excess Liquidity 15,000.00 USD / 13,000.00 USD

My excess liquidity goes down.
langlands
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by langlands »

pleonasm wrote: Thu Apr 01, 2021 7:33 pm
langlands wrote: Thu Apr 01, 2021 7:11 pm
pleonasm wrote: Thu Apr 01, 2021 7:05 pm You got a loan of $4900 from the market instead of IBKR. You didn't "create" $4900, you simply changed who you owed it to. You now owe your option counterparties $0.50 of the contract value at expiration instead of paying the 1% APR to IBKR.

Boxes should only be used by people interested in going into margin debt- but do not want to pay Fidelity/TDA usury. At 1% at IBKR or no/low margin utilization you should not use them.
I believe OP knows that. The problem is that 100% of the cash is being held up as collateral to support the trade.

Is there any particular negative to using them, other than the hassle?
Not in my experience. Yes there is maintenance but it's the normal 25% for me.
Image

I receive $19920 after fees that are now moved from margin debt to normal. I take the 25% maintenance requirement hit. I still have 75% of the credit to trade as normal for $70 over the next 5 months.
Interesting. Is that a snapshot from right now? What do you think of what's said here:
https://www.interactivebrokers.com/en/index.php?f=26660

It looks like the maintenance margin from the handbook is 100%, not 25%.
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

pleonasm wrote: Thu Apr 01, 2021 7:33 pm
langlands wrote: Thu Apr 01, 2021 7:11 pm
pleonasm wrote: Thu Apr 01, 2021 7:05 pm You got a loan of $4900 from the market instead of IBKR. You didn't "create" $4900, you simply changed who you owed it to. You now owe your option counterparties $0.50 of the contract value at expiration instead of paying the 1% APR to IBKR.

Boxes should only be used by people interested in going into margin debt- but do not want to pay Fidelity/TDA usury. At 1% at IBKR or no/low margin utilization you should not use them.
I believe OP knows that. The problem is that 100% of the cash is being held up as collateral to support the trade.

Is there any particular negative to using them, other than the hassle?
Not in my experience. Yes there is maintenance but it's the normal 25% for me.
Image

I receive $19920 after fees that are now moved from margin debt to normal. I take the 25% maintenance requirement hit. I still have 75% of the credit to trade as normal for $70 over the next 5 months.
Do you have portfolio margin?
pleonasm
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by pleonasm »

Yes this is a current snapshot. Yes I have portfolio margin.
70 / 14920 (credit less the maintenance) = .00469 * 2 (to annualize) = 0.9% is the loan I am paying for this trade.
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

pleonasm wrote: Thu Apr 01, 2021 7:44 pm Yes this is a current snapshot. Yes I have portfolio margin.
70 / 14920 (credit less the maintenance) = .00469 * 2 (to annualize) = 0.9% is the loan I am paying for this trade.
are you able to withdraw the cash, if you wanted to?
pleonasm
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by pleonasm »

kellykline wrote: Thu Apr 01, 2021 7:45 pm
pleonasm wrote: Thu Apr 01, 2021 7:44 pm Yes this is a current snapshot. Yes I have portfolio margin.
70 / 14920 (credit less the maintenance) = .00469 * 2 (to annualize) = 0.9% is the loan I am paying for this trade.
are you able to withdraw the cash, if you wanted to?
Yes
UberGrub
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by UberGrub »

kellykline wrote: Thu Apr 01, 2021 7:35 pm
UberGrub wrote: Thu Apr 01, 2021 7:31 pm Did your cash balance increase by $4850 after selling the box?
It did, but it's moot since my RegT Margin also increased by $5,000.
My SMA did not change. Can't withdraw the cash, what's the use of this?
Gotcha. I was not sure if it would work in RegT. I used Portfolio Margin since that's what Steve said to do. Looks like for good reason.

The use is to borrow at far cheaper rates (but you need PM to use apparently). It's not a hoax, Steve used these and I use them too. There's an user called Dry-Drink on Reddit that has posted screenshots of their account. They borrowed about half a million on boxes alone to buy stocks. The screenshot here would get margin called by RegT if the boxes were raising the MM:
https://www.reddit.com/r/wallstreetbets ... o_deliver/
UberGrub
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by UberGrub »

UberGrub wrote: Thu Apr 01, 2021 7:47 pm
kellykline wrote: Thu Apr 01, 2021 7:35 pm
UberGrub wrote: Thu Apr 01, 2021 7:31 pm Did your cash balance increase by $4850 after selling the box?
It did, but it's moot since my RegT Margin also increased by $5,000.
My SMA did not change. Can't withdraw the cash, what's the use of this?
Gotcha. I was not sure if it would work in RegT. I used Portfolio Margin since that's what Steve said to do. Looks like for good reason.

The use is to borrow at far cheaper rates (but you need PM to use apparently). It's not a hoax, Steve used these and I use them too. There's an user called Dry-Drink on Reddit that has posted screenshots of their account. They borrowed about half a million on boxes alone to buy stocks. The screenshot here would get margin called by RegT if the boxes were raising the MM:
https://www.reddit.com/r/wallstreetbets ... o_deliver/
I mean, the MM in that screenshot is $170K even though Dry-Drink is has nearly half a million in short boxes. I know for a fact it works personally but yeah, the thread above is hard proof of what it looks like.
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

UberGrub wrote: Thu Apr 01, 2021 7:49 pm I mean, the MM in that screenshot is $170K even though Dry-Drink is has nearly half a million in short boxes. I know for a fact it works personally but yeah, the thread above is hard proof of what it looks like.
great info, thx UberGrubHub!

looks like my account won't qualify for portfolio margin, you need like $110,000 minimum for that...

[(removed) --admin LadyGeek] question: what if I fund the account to $110,000, turn portfolio margin on, then sell half a million in short boxes, and transfer my assets so all that's left is close to the MM (but going below the portfolio margin minimum), BUT leave the short boxes on IBKR...

what's going to happen then? I mean IBKR can't downgrade my portfolio margin right? all they could do is just restrict my account from doing more margin trades.
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

pleonasm wrote: Thu Apr 01, 2021 7:46 pm
kellykline wrote: Thu Apr 01, 2021 7:45 pm
pleonasm wrote: Thu Apr 01, 2021 7:44 pm Yes this is a current snapshot. Yes I have portfolio margin.
70 / 14920 (credit less the maintenance) = .00469 * 2 (to annualize) = 0.9% is the loan I am paying for this trade.
are you able to withdraw the cash, if you wanted to?
Yes
Thx. 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...
inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

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

Post by firebirdparts »

That could certainly upset the apple cart, and that is the reason people prefer to use euro options. I think you should not get assigned, but the truth is anybody could execute one of those short options any time, even if it's dumb for them to do so.
This time is the same
UberGrub
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by UberGrub »

kellykline wrote: Fri Apr 02, 2021 5:02 am
pleonasm wrote: Thu Apr 01, 2021 7:46 pm
kellykline wrote: Thu Apr 01, 2021 7:45 pm
pleonasm wrote: Thu Apr 01, 2021 7:44 pm Yes this is a current snapshot. Yes I have portfolio margin.
70 / 14920 (credit less the maintenance) = .00469 * 2 (to annualize) = 0.9% is the loan I am paying for this trade.
are you able to withdraw the cash, if you wanted to?
Yes
Thx. 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...
I have just been letting them expire. They're European and cash settled so nbd. What special rules are you referring to? :confused
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kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

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
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

firebirdparts wrote: Fri Apr 02, 2021 4:33 pm That could certainly upset the apple cart, and that is the reason people prefer to use euro options. I think you should not get assigned, but the truth is anybody could execute one of those short options any time, even if it's dumb for them to do so.
alright, i'm feeling [(removed) --admin LadyGeek]. Here's my new Box Order, come at me IBKR!!

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

Dec 2023 Expiry
Selling the box for $393 for a sub 1% loan. Why $393? I figured the 3Y treasuries right now yield about 0.35%. Tacked on another 0.4% free money for the MMs...

Can you experts review this trade [OT comment remove by admin LadyGeek]? :beer
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

UberGrub wrote: Fri Apr 02, 2021 4:37 pm
kellykline wrote: Fri Apr 02, 2021 5:02 am
pleonasm wrote: Thu Apr 01, 2021 7:46 pm
kellykline wrote: Thu Apr 01, 2021 7:45 pm
pleonasm wrote: Thu Apr 01, 2021 7:44 pm Yes this is a current snapshot. Yes I have portfolio margin.
70 / 14920 (credit less the maintenance) = .00469 * 2 (to annualize) = 0.9% is the loan I am paying for this trade.
are you able to withdraw the cash, if you wanted to?
Yes
Thx. 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...
I have just been letting them expire. They're European and cash settled so nbd. What special rules are you referring to? :confused
Regarding the 30 day rule, I was referring to this article from the OCC : https://www.optionseducation.org/refere ... -cash.aspx

From the bottom of Page 5:
"...With the aggregation across multiple clients and with a concentration of activity involving quarterly expirations a clearing firm’s liquidity obligation could exceeded the size of OCC’s committed credit facilities.

To insure the adequacy of its financial resources, OCC has a liquidity margin call policy in place that can cause OCC to require a clearing member to maintain a certain amount of cash margin deposits when their aggregated liquidity demand exceeds certain thresholds. The policy begins 30 days prior to expiration, and has specific thresholds at both the 30 day and 5 day horizon. To avoid the
policy thresholds market participants may wish to look at using non-quarterly expiries as the basis for option boxes."

What does that mean? Is the DEC 2023 box a quarterly options? wth!
inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

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're right. Was thinking SPY.
Semantics
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Semantics »

kellykline wrote: Fri Apr 02, 2021 5:36 pm
UberGrub wrote: Fri Apr 02, 2021 4:37 pm
kellykline wrote: Fri Apr 02, 2021 5:02 am
pleonasm wrote: Thu Apr 01, 2021 7:46 pm
kellykline wrote: Thu Apr 01, 2021 7:45 pm

are you able to withdraw the cash, if you wanted to?
Yes
Thx. 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...
I have just been letting them expire. They're European and cash settled so nbd. What special rules are you referring to? :confused
Regarding the 30 day rule, I was referring to this article from the OCC : https://www.optionseducation.org/refere ... -cash.aspx

From the bottom of Page 5:
"...With the aggregation across multiple clients and with a concentration of activity involving quarterly expirations a clearing firm’s liquidity obligation could exceeded the size of OCC’s committed credit facilities.

To insure the adequacy of its financial resources, OCC has a liquidity margin call policy in place that can cause OCC to require a clearing member to maintain a certain amount of cash margin deposits when their aggregated liquidity demand exceeds certain thresholds. The policy begins 30 days prior to expiration, and has specific thresholds at both the 30 day and 5 day horizon. To avoid the
policy thresholds market participants may wish to look at using non-quarterly expiries as the basis for option boxes."

What does that mean? Is the DEC 2023 box a quarterly options? wth!
I doubt this is relevant to an individual seller of box spreads, as we wouldn't interface with the clearing house directly. When the option is settled your cash balance at your broker will just decrease by the settlement amount amount, possibly resulting in (more) margin interest if negative.

Personally I plan to keep it as simple as possible and just let my box spreads expire and then sell new ones. It might also be possible to roll them close to expiry like you would with other option combos, but I wonder if it's as easy to get filled that way, plus it's extra transactions and commission paid.

Dec 2023 options expire on Dec 15th so they aren't quarterly. "Quarterly options" means they expire on the last trading day of the quarter, e.g. Dec 31.
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

Great!! Thanks as always y’all are awesome! :sharebeer
nalor511
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by nalor511 »

I've read the whole thread, and a few others, and still don't quite get it. What are you borrowing against, is it against your brokerage assets like you would be when using margin?
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

nalor511 wrote: Sat Apr 03, 2021 2:35 pm I've read the whole thread, and a few others, and still don't quite get it. What are you borrowing against, is it against your brokerage assets like you would be when using margin?
Unless you have portfolio margin, this doesn’t do much for you.
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

UberGrub wrote: Fri Apr 02, 2021 4:37 pm
Do y’all know what’s gonna happen if/when marginal treasury yields go negative? Would we get paid instead to maintain these boxes? :twisted:
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

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

Post by inbox788 »

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!!!
I'm not sure what this will achieve, but the bid/ask spread is 300/480 after hours in my paper trading account. I'll put in a 300 sell and see if it goes thru. Heck, I'll put in a market order as well, so that should work and let you know it it goes thru and what level. It's partly a simulation, so it might not reflect actual trading values.

I'm still trying to understand how this converts into margin or cash I can withdraw.

Break even Price N/A
Max Profit ALWAYS LOSS
Max Loss $10,230 (not including dividend risk)
Buying Power Effect ($10,230) [negative buying power]

Wait, so if I collect $30,000 from the sale, that's $20k net? Where do I find the $20k?
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

inbox788 wrote: Mon Apr 05, 2021 8:22 pm
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!!!
I'm not sure what this will achieve, but the bid/ask spread is 300/480 after hours in my paper trading account. I'll put in a 300 sell and see if it goes thru. Heck, I'll put in a market order as well, so that should work and let you know it it goes thru and what level. It's partly a simulation, so it might not reflect actual trading values.

I'm still trying to understand how this converts into margin or cash I can withdraw.

Break even Price N/A
Max Profit ALWAYS LOSS
Max Loss $10,230 (not including dividend risk)
Buying Power Effect ($10,230) [negative buying power]

Wait, so if I collect $30,000 from the sale, that's $20k net? Where do I find the $20k?
HWUAT!?!?! don't do that!!! a 300 sell would mean you're paying 11% APY in interest!!!!
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

Just an update: somebody bought my box for $391. Now I'm regretting not selling it for a higher credit. Could've fetched $392, which meant an effective 0.85% loan. I don't have any other exposure on this account. Someone tell me how the MMs / IBKR are going to screw me over in the next 3 years (till options expiry).
inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

kellykline wrote: Tue Apr 06, 2021 10:55 am Just an update: somebody bought my box for $391. Now I'm regretting not selling it for a higher credit. Could've fetched $392, which meant an effective 0.85% loan. I don't have any other exposure on this account. Someone tell me how the MMs / IBKR are going to screw me over in the next 3 years (till options expiry).
That could have been me (wasn't, because it was a paper trade account), but more likely your trade activated my simulated trade. The 3 orders all went thru at $391.30 @ 7:18 AM. I thought I only put in 2 orders, one at $300 and the other at market, but I initially put in an order for $391 that I forgot about. [another order for 3925/3975 went thru at $49]

-1 C3800 635.90
+1 C4200 408.70
-1 P4200 600.30
+1 P3800 436.20

I'm not seeing 40k credit anywhere. My net liquidation value is now only 15k more than my available buying power. Was 25k last night. There still one order pending at $400, wrong expiration that didn't go thru, so I canceled it. Trying to make sense of the account and margin effects, but not clear where the changes are taking place.
537,802-522,087 now
537,293-512,563 last night orders pending
I see line item SPX margin $137k total. Maybe it's 3x40k... I'll have to see if I'm using or getting margin. But it's not showing up in the account total number from what I can tell so far.

So, how much loan did you take out at near 0.85%? How or where does it show up in your account? That is, what numbers go up and down after the trade? How do you cash out?
kellykline wrote: Mon Apr 05, 2021 9:10 pmHWUAT!?!?! don't do that!!! a 300 sell would mean you're paying 11% APY in interest!!!!
How's the interest rate being calculated?

If you're borrowing money at 0.85%, I understand why you'd be selling the box, but is there a reason someone would be buying it straight out? Or are you counting on 4 independent option trades at market prices matching up to your desired interest rate? Looks kind of like a free lunch...
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

inbox788 wrote: Tue Apr 06, 2021 11:52 am
kellykline wrote: Tue Apr 06, 2021 10:55 am Just an update: somebody bought my box for $391. Now I'm regretting not selling it for a higher credit. Could've fetched $392, which meant an effective 0.85% loan. I don't have any other exposure on this account. Someone tell me how the MMs / IBKR are going to screw me over in the next 3 years (till options expiry).
That could have been me (wasn't, because it was a paper trade account), but more likely your trade activated my simulated trade. The 3 orders all went thru at $391.30 @ 7:18 AM. I thought I only put in 2 orders, one at $300 and the other at market, but I initially put in an order for $391 that I forgot about. [another order for 3925/3975 went thru at $49]

-1 C3800 635.90
+1 C4200 408.70
-1 P4200 600.30
+1 P3800 436.20

I'm not seeing 40k credit anywhere. My net liquidation value is now only 15k more than my available buying power. Was 25k last night. There still one order pending at $400, wrong expiration that didn't go thru, so I canceled it. Trying to make sense of the account and margin effects, but not clear where the changes are taking place.
537,802-522,087 now
537,293-512,563 last night orders pending
I see line item SPX margin $137k total. Maybe it's 3x40k... I'll have to see if I'm using or getting margin. But it's not showing up in the account total number from what I can tell so far.

So, how much loan did you take out at near 0.85%? How or where does it show up in your account? That is, what numbers go up and down after the trade? How do you cash out?
kellykline wrote: Mon Apr 05, 2021 9:10 pmHWUAT!?!?! don't do that!!! a 300 sell would mean you're paying 11% APY in interest!!!!
How's the interest rate being calculated?

If you're borrowing money at 0.85%, I understand why you'd be selling the box, but is there a reason someone would be buying it straight out? Or are you counting on 4 independent option trades at market prices matching up to your desired interest rate? Looks kind of like a free lunch...
Wow that's so cool. Yeah, I could've sold it for $391.30. But I'll take it, still a sub-1% loan vs paying say TD Ameritrade 8% in margin interests.

Since I sold it for $391, it's effectively a $39,100 loan.
Topic Author
kellykline
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

inbox788 wrote: Tue Apr 06, 2021 11:52 am
If you're borrowing money at 0.85%, I understand why you'd be selling the box, but is there a reason someone would be buying it straight out? Or are you counting on 4 independent option trades at market prices matching up to your desired interest rate? Looks kind of like a free lunch...
Yeah, that's what I'm trying to figure out... if the MMs or IBKR or both are bending me over slowly... so far so good though. Will have to see what it does once my monthly statement for April comes out. they could just shut my account down and ban me from IBKR for borrowing cash for cheap. I hope not!
inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

kellykline wrote: Tue Apr 06, 2021 1:35 pmWow that's so cool. Yeah, I could've sold it for $391.30. But I'll take it, still a sub-1% loan vs paying say TD Ameritrade 8% in margin interests.

Since I sold it for $391, it's effectively a $39,100 loan.
Aha moment! So borrowing $39,100 and paying $40,000 back in 2023, so it costs $900 interest.
900/40k/3 years = .75% (little more than .8% if you use 2.75 years)

So if I had sold one for $300, I'd be paying 10k/40k/3 years = 8.33%! I had now clue how bad a fill that would have been. How did you get 11% APY?

I'm not sure when you're paying the interest. When you sell the box or pay it back? But either way it's different than a monthly payment calculation.
kellykline wrote: Tue Apr 06, 2021 1:38 pmYeah, that's what I'm trying to figure out... if the MMs or IBKR or both are bending me over slowly... so far so good though. Will have to see what it does once my monthly statement for April comes out. they could just shut my account down and ban me from IBKR for borrowing cash for cheap. I hope not!
As long as you're paying into the system, I don't see how they're losing out, and they may be benefiting in other ways. Is this generating liquidity? Maybe this trade is removing liquidity, which where the payment goes.

I don't think a lot of people are doing this that it matters to them, and I'm sure there are some caveats to this strategy that we still need to identify. And it's not like we can borrow at 0.55% and put it in 1.25% CDs.

https://www.lesswrong.com/posts/8NSKMMD ... tly-faster

And if the script kiddies or WSB folks at Reddit got wind of this and ran with it, things could go wild, but they're not interested in small percentages, just hundreds and thousands of percent.
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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 06, 2021 3:06 pm
kellykline wrote: Tue Apr 06, 2021 1:35 pmWow that's so cool. Yeah, I could've sold it for $391.30. But I'll take it, still a sub-1% loan vs paying say TD Ameritrade 8% in margin interests.

Since I sold it for $391, it's effectively a $39,100 loan.
Aha moment! So borrowing $39,100 and paying $40,000 back in 2023, so it costs $900 interest.
900/40k/3 years = .75% (little more than .8% if you use 2.75 years)

So if I had sold one for $300, I'd be paying 10k/40k/3 years = 8.33%! I had now clue how bad a fill that would have been. How did you get 11% APY?

I'm not sure when you're paying the interest. When you sell the box or pay it back? But either way it's different than a monthly payment calculation.
kellykline wrote: Tue Apr 06, 2021 1:38 pmYeah, that's what I'm trying to figure out... if the MMs or IBKR or both are bending me over slowly... so far so good though. Will have to see what it does once my monthly statement for April comes out. they could just shut my account down and ban me from IBKR for borrowing cash for cheap. I hope not!
As long as you're paying into the system, I don't see how they're losing out, and they may be benefiting in other ways. Is this generating liquidity? Maybe this trade is removing liquidity, which where the payment goes.

I don't think a lot of people are doing this that it matters to them, and I'm sure there are some caveats to this strategy that we still need to identify. And it's not like we can borrow at 0.55% and put it in 1.25% CDs.

https://www.lesswrong.com/posts/8NSKMMD ... tly-faster

And if the script kiddies or WSB folks at Reddit got wind of this and ran with it, things could go wild, but they're not interested in small percentages, just hundreds and thousands of percent.
Excellent analysis! yeah, to get to 11%, 10k/30k/3 years since the interest ($10k) was paid up-front and you're really borrowing $30k (what's left).

It's already hit WSB. That's what led to the legendary guy who used box spreads to get unlimited monies in Robbinghood. And, because it's Robbinghood, Vlad and his team of bandits were always looking for ways to loot. They found this guy and looted him to the tooth, tossed him around like dirty salad. think his name is Ironyman (lol!), here's an article about his high adventures with box spreads:

https://manageyourmonies.com/index.php/ ... -into-58k/
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

kellykline wrote: Tue Apr 06, 2021 3:46 pm Excellent analysis! yeah, to get to 11%, 10k/30k/3 years since the interest ($10k) was paid up-front and you're really borrowing $30k (what's left).

It's already hit WSB. That's what led to the legendary guy who used box spreads to get unlimited monies in Robbinghood. And, because it's Robbinghood, Vlad and his team of bandits were always looking for ways to loot. They found this guy and looted him to the tooth, tossed him around like dirty salad. think his name is Ironyman (lol!), here's an article about his high adventures with box spreads:

https://manageyourmonies.com/index.php/ ... -into-58k/
Ah, the 25% margin difference, which I've yet to identify in my account and trades (reg-T, SMA, etc. I'll keep looking.).

It's not obvious to me the 10k interest is paid up front. So far it's all numbers in the account to me, and not real cash, so the 10k could be borrowed as long as you're not maxing out the margin account and getting liquidated.

One guy is an outlier, but a million readers following the same method and madness...

Thankfully, the market is a self-correcting system.

At 391, this loan 40k loan looks like it's costing $900 interest/year or $300/year. A year from now, interest rates unchanged, I decide to "pay it back". I should be able to buy it for 394 and someone who wants to borrow will sell it. Starts to look a little like the leveraged CDOs during the financial crisis.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

inbox788 wrote: Tue Apr 06, 2021 4:07 pm
kellykline wrote: Tue Apr 06, 2021 3:46 pm Excellent analysis! yeah, to get to 11%, 10k/30k/3 years since the interest ($10k) was paid up-front and you're really borrowing $30k (what's left).

It's already hit WSB. That's what led to the legendary guy who used box spreads to get unlimited monies in Robbinghood. And, because it's Robbinghood, Vlad and his team of bandits were always looking for ways to loot. They found this guy and looted him to the tooth, tossed him around like dirty salad. think his name is Ironyman (lol!), here's an article about his high adventures with box spreads:

https://manageyourmonies.com/index.php/ ... -into-58k/
Ah, the 25% margin difference, which I've yet to identify in my account and trades (reg-T, SMA, etc. I'll keep looking.).

It's not obvious to me the 10k interest is paid up front. So far it's all numbers in the account to me, and not real cash, so the 10k could be borrowed as long as you're not maxing out the margin account and getting liquidated.

One guy is an outlier, but a million readers following the same method and madness...

Thankfully, the market is a self-correcting system.

At 391, this loan 40k loan looks like it's costing $900 interest/year or $300/year. A year from now, interest rates unchanged, I decide to "pay it back". I should be able to buy it for 394 and someone who wants to borrow will sell it. Starts to look a little like the leveraged CDOs during the financial crisis.
Yup! Actually, interest rates doesn't matter because the option's max loss is $40,000 (bracket between SPX 3800 and 4200) and it was just sold for $391. I think the risk is if IBKR's algo goes crazy and starts liquidating individual legs on its own... which would be time to lawyer up and file lawsuits.

If the 3 year treasury yield goes up, my box will be worth more. I can buy the box back for less than the cost of the box. So it's a bonus for me, if interest rates go higher. I am rooting for negative interest rates though, I mean, let the banks pay us to take a loan (lmao!). definitely not good for the dollar, hence why I'm buying bitcoin and doge (lmao!)
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

Great thread :happy (together with the Lifecycle Investing thread viewtopic.php?p=5040888)!
kellykline wrote: Tue Apr 06, 2021 4:23 pm I am rooting for negative interest rates though, I mean, let the banks pay us to take a loan (lmao!). definitely not good for the dollar, hence why I'm buying bitcoin and doge (lmao!)
I have a EUR-based account at IB, so instead of using SPX options, I opted for Eurostoxx50 options. The funny thing was, yesterday, I indeed got a -0.43% APY rate for a short box spread with options expiring Dec'22! :D
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

outofthebox wrote: Thu Apr 08, 2021 3:41 pm Great thread :happy (together with the Lifecycle Investing thread viewtopic.php?p=5040888)!
kellykline wrote: Tue Apr 06, 2021 4:23 pm I am rooting for negative interest rates though, I mean, let the banks pay us to take a loan (lmao!). definitely not good for the dollar, hence why I'm buying bitcoin and doge (lmao!)
I have a EUR-based account at IB, so instead of using SPX options, I opted for Eurostoxx50 options. The funny thing was, yesterday, I indeed got a -0.43% APY rate for a short box spread with options expiring Dec'22! :D
Congrats!

Well you're really getting the 2Y treasury rates, which is at 0.151 right now. These boxes seem to fill at "TreasuryYield" + 0.3% premium.
Thinking back, I should've done that. 0.43% APY is literally free money!!!!
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

Yes, the Euribor rates are all negative, so indeed I get kind of "paid" to get a loan.

Euribor 1 week -0.563 %
Euribor 1 month -0.553 %
Euribor 3 months -0.543 %
Euribor 6 months -0.517 %
Euribor 12 months -0.492 %

But I think, it is priced in the USDEUR exchange rate, so if you did the same as an American investor, you would probably not be able to benefit from these rates (I am not 100% sure)?

Nevertheless, I expected something along the lines of Euribor rate + 0.3/0.4 %, but was really surprised to be that close to the actual rate!
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

do you have portfolio margin? this is useless without portfolio margin.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

kellykline wrote: Thu Apr 08, 2021 6:28 pm do you have portfolio margin? this is useless without portfolio margin.
Yes, I have PM (it is standard for European IB accounts, without the 100k requirement) - though I figured out that the size of the box has barely any effect on the initial margin change.

I first bought a box with 3700-2400 legs on the EUROSTOXX50
-->initial margin change of ~9000 EUR (for a credit of ~13100 EUR)

If I buy a box with 5000-1000 legs
-->initial margin change of ~7200 EUR (for a credit of ~40260 EUR)

Lesson learnt:
Buy wider spread legs to make the impact on the initial margin as low as possible.


EDIT:
Just purchased that 5000-1000 box for 40265 EUR of credit --> which should result in an APY of -0.58 % :) (expiry on Jun'22)
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

outofthebox wrote: Fri Apr 09, 2021 3:39 am
kellykline wrote: Thu Apr 08, 2021 6:28 pm do you have portfolio margin? this is useless without portfolio margin.
Yes, I have PM (it is standard for European IB accounts, without the 100k requirement) - though I figured out that the size of the box has barely any effect on the initial margin change.

I first bought a box with 3700-2400 legs on the EUROSTOXX50
-->initial margin change of ~9000 EUR (for a credit of ~13100 EUR)

If I buy a box with 5000-1000 legs
-->initial margin change of ~7200 EUR (for a credit of ~40260 EUR)

Lesson learnt:
Buy wider spread legs to make the impact on the initial margin as low as possible.


EDIT:
Just purchased that 5000-1000 box for 40265 EUR of credit --> which should result in an APY of -0.58 % :) (expiry on Jun'22)
Nice!!! Were you able to withdraw the money for use? PM accounts should let you do that. Imagine opening several boxes and just taking out these loans at 0.58% APY!!!! Buy TQQQ or SPXL triple leverage with it and pay it off in 3 months as the US stock market goes PARABOLIC! (New, New, NEW BULL MARKET!!)

Or if you're a scaredy cat, you could always put it in a CD and earn 2-3% on it. On a $1,000,000 loan, that's $30,000 right there. seriously, why are ppl working their asses off for minimum wage when they can get paid in a few clicks. Free money, zero risk! You can thank Papa Powell for that, his printer is going brrrrr! check out the chart below. LOL It's a FED-RUN BULL MARKET WITH UNLIMITED FREE MONEY HACK!

Image

hitting 8 trillion soon, that's $ 8,000,000,000,000 !!!!!
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

By the way, I'm selling more boxes in the next few weeks. Goal is to raise $2.5 Million in cheap loans expiring Dec 2023 @ 0.75% APY. Buy My Boxes Pls!!!

Interest rates going up in 3 years, guaranteed. Better lock in your rates right now!!! Get them while they're HOT, before they're SOLD OUT !!!

ps: yes, you dummies, inflation is going up! cash is trash, smash that mic on the floor.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

kellykline wrote: Wed Mar 31, 2021 3:30 pm
comeinvest wrote: Wed Mar 31, 2021 4:13 am
kellykline wrote: Tue Mar 30, 2021 9:51 pm Here’s my order :
SELL 1 SPX CALL 3950
BUY 1 SPX CALL 3975
SELL 1 SPX PUT 3975
BUY 1 SPX PUT 3950

For the options expiring in 2023.
Selling the box for around $24.65 for a sub 1% loan.

Never gets filled.
I was filled at 0.45-0.5% above risk-free rates for similar boxes. Others reportedly got filled at 3.x% above risk-free rates a few months ago.
3-year government bonds currently yield 0.335%.
Your limit implies 0.596% interest rate. You probably have to lower your limit.
Thanks, so if I understand you correctly, the box should be sold at $24.50. That works out to be a loan at 0.955% interest (including commission)?

I walked my box down on CBOE to $24.40 and still no takers.
If you got filled at $24.50 on or around 03/31/2020 for expiry at 12/15/2023, the implied annual interest rate for 2 years and 8.5 months would be about (25/24.5) ^ (1 / (2 + 8.5/12)) = ca. 0.75%, or not?
Also, you said in a later post that you got filled at $25.50, but didn't you say before that you walked down your order to $24.40 ?
Last edited by comeinvest on Sun Apr 11, 2021 2:35 am, edited 2 times in total.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

kellykline wrote: Fri Apr 02, 2021 5:29 pm
firebirdparts wrote: Fri Apr 02, 2021 4:33 pm That could certainly upset the apple cart, and that is the reason people prefer to use euro options. I think you should not get assigned, but the truth is anybody could execute one of those short options any time, even if it's dumb for them to do so.
alright, i'm feeling [(removed) --admin LadyGeek]. Here's my new Box Order, come at me IBKR!!

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

Dec 2023 Expiry
Selling the box for $393 for a sub 1% loan. Why $393? I figured the 3Y treasuries right now yield about 0.35%. Tacked on another 0.4% free money for the MMs...

Can you experts review this trade [OT comment remove by admin LadyGeek]? :beer
Your math is a bit off. I think your loan would have been at ca. 0.65% with your numbers.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

comeinvest wrote: Sun Apr 11, 2021 2:21 am
kellykline wrote: Fri Apr 02, 2021 5:29 pm
firebirdparts wrote: Fri Apr 02, 2021 4:33 pm That could certainly upset the apple cart, and that is the reason people prefer to use euro options. I think you should not get assigned, but the truth is anybody could execute one of those short options any time, even if it's dumb for them to do so.
alright, i'm feeling [(removed) --admin LadyGeek]. Here's my new Box Order, come at me IBKR!!

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

Dec 2023 Expiry
Selling the box for $393 for a sub 1% loan. Why $393? I figured the 3Y treasuries right now yield about 0.35%. Tacked on another 0.4% free money for the MMs...

Can you experts review this trade [OT comment remove by admin LadyGeek]? :beer
Your math is a bit off. I think your loan would have been at ca. 0.65% with your numbers.
That's insane! And people are still happily paying TD Ameritrade 8% margin rates. lol
inbox788
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

kellykline wrote: Fri Apr 09, 2021 12:19 pm
outofthebox wrote: Fri Apr 09, 2021 3:39 am
kellykline wrote: Thu Apr 08, 2021 6:28 pm do you have portfolio margin? this is useless without portfolio margin.
Yes, I have PM (it is standard for European IB accounts, without the 100k requirement) - though I figured out that the size of the box has barely any effect on the initial margin change.

I first bought a box with 3700-2400 legs on the EUROSTOXX50
-->initial margin change of ~9000 EUR (for a credit of ~13100 EUR)

If I buy a box with 5000-1000 legs
-->initial margin change of ~7200 EUR (for a credit of ~40260 EUR)

Lesson learnt:
Buy wider spread legs to make the impact on the initial margin as low as possible.


EDIT:
Just purchased that 5000-1000 box for 40265 EUR of credit --> which should result in an APY of -0.58 % :) (expiry on Jun'22)
Nice!!! Were you able to withdraw the money for use? PM accounts should let you do that. Imagine opening several boxes and just taking out these loans at 0.58% APY!!!! Buy TQQQ or SPXL triple leverage with it and pay it off in 3 months as the US stock market goes PARABOLIC! (New, New, NEW BULL MARKET!!)

Or if you're a scaredy cat, you could always put it in a CD and earn 2-3% on it. On a $1,000,000 loan, that's $30,000 right there. seriously, why are ppl working their asses off for minimum wage when they can get paid in a few clicks. Free money, zero risk! You can thank Papa Powell for that, his printer is going brrrrr! check out the chart below. LOL It's a FED-RUN BULL MARKET WITH UNLIMITED FREE MONEY HACK!
This is getting interesting!
Forget 2 or 3% CDs, why can’t you take the cash and use it to lever up 30 or 100 or 1000x? -0.58% becomes 5800%!
What’s the limit? Risk?
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

what is risk? :twisted:
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

inbox788 wrote: Sun Apr 11, 2021 3:51 am This is getting interesting!
Forget 2 or 3% CDs, why can’t you take the cash and use it to lever up 30 or 100 or 1000x? -0.58% becomes 5800%!
What’s the limit? Risk?
You mean lever up in stocks, or levering up that free cash for every credit? I assume the latter:

The problem with it is that it is prevented by the initial margin, going up by about 20-25% of your credit sum. I tried it with SPX, there the effect on initial margin is barely noticeable.

It seems like they wanted to prevent exactly the scenario you describe :wink:
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

outofthebox wrote: Sun Apr 11, 2021 4:21 am
inbox788 wrote: Sun Apr 11, 2021 3:51 am This is getting interesting!
Forget 2 or 3% CDs, why can’t you take the cash and use it to lever up 30 or 100 or 1000x? -0.58% becomes 5800%!
What’s the limit? Risk?
You mean lever up in stocks, or levering up that free cash for every credit? I assume the latter:

The problem with it is that it is prevented by the initial margin, going up by about 20-25% of your credit sum. I tried it with SPX, there the effect on initial margin is barely noticeable.

It seems like they wanted to prevent exactly the scenario you describe :wink:
Do you have portfolio margin? :)
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by inbox788 »

outofthebox wrote: Sun Apr 11, 2021 4:21 amYou mean lever up in stocks, or levering up that free cash for every credit? I assume the latter:

The problem with it is that it is prevented by the initial margin, going up by about 20-25% of your credit sum. I tried it with SPX, there the effect on initial margin is barely noticeable.

It seems like they wanted to prevent exactly the scenario you describe :wink:
Yes. I'm still having trouble identifying the margin usage and benefit of this scheme. For a moment, I thought you could deposit $100k (collateral) into an account and sell box spread and borrow and take out $100k (collateral) from the account, which if you're paying interest isn't really a problem. Whoever is lending you the money can get it for a lower rate. But when the rate goes below zero, then someone is paying up, and that does become a problem (perpetual motion).

Anyway, from what I've seen in my account, my net liquidation value stays about the same, but my buying power goes down by 25% of the position initially, but lowers after execution. My margin account shows a 15k difference between net liq value and available buying power (xx20k vs xx05k). I have 3 boxes 3800/4200 ($40k per?) and 1 3925/3975 ($5k?), so I'm trying to figure out how to taking out that $125k total from my account does to the net liq value and buying power numbers. (while the orders were pending, the difference was $25k)

https://wiki.stockfuse.com/education/un ... n_account/

I'm still missing something in understanding what's going on, but I'm realizing a margin call can really lead to a chain of disastrous events to this concept, especially if levered up and near limits.

Recall the concerns and problems around the phony collateral loans that seems to have been subdued.
‘Ghost collateral’ haunts loans across China’s debt-laden banking system
https://www.reuters.com/investigates/sp ... eral-fake/

Anyway, I just put in another paper order sell at $392 (AH showing 392.20) and it consumed only $800 margin. That's 400-392=8, and the interest "cost" paid up front as margin. After it trades, I'm expecting $10k initial margin requirement, but I'm suspecting the maintenance margin might only be $5k. But where is the $40k going and how do finish borrowing it to pay down my mortgage or buy a new car? WTH, might as well try 100 boxes; put in a market order to sell 100 of them costing $78k max loss and generating almost $4M credit! Let's see if it goes thru...it's only paper.
outofthebox wrote: Thu Apr 08, 2021 3:41 pmI have a EUR-based account at IB, so instead of using SPX options, I opted for Eurostoxx50 options. The funny thing was, yesterday, I indeed got a -0.43% APY rate for a short box spread with options expiring Dec'22! :D
What happened to your buying power? Did it go up? Even if only 0.43%?
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by kellykline »

inbox788 wrote: Sun Apr 11, 2021 12:21 pm
outofthebox wrote: Sun Apr 11, 2021 4:21 amYou mean lever up in stocks, or levering up that free cash for every credit? I assume the latter:

The problem with it is that it is prevented by the initial margin, going up by about 20-25% of your credit sum. I tried it with SPX, there the effect on initial margin is barely noticeable.

It seems like they wanted to prevent exactly the scenario you describe :wink:
Yes. I'm still having trouble identifying the margin usage and benefit of this scheme. For a moment, I thought you could deposit $100k (collateral) into an account and sell box spread and borrow and take out $100k (collateral) from the account, which if you're paying interest isn't really a problem. Whoever is lending you the money can get it for a lower rate. But when the rate goes below zero, then someone is paying up, and that does become a problem (perpetual motion).

Anyway, from what I've seen in my account, my net liquidation value stays about the same, but my buying power goes down by 25% of the position initially, but lowers after execution. My margin account shows a 15k difference between net liq value and available buying power (xx20k vs xx05k). I have 3 boxes 3800/4200 ($40k per?) and 1 3925/3975 ($5k?), so I'm trying to figure out how to taking out that $125k total from my account does to the net liq value and buying power numbers. (while the orders were pending, the difference was $25k)

https://wiki.stockfuse.com/education/un ... n_account/

I'm still missing something in understanding what's going on, but I'm realizing a margin call can really lead to a chain of disastrous events to this concept, especially if levered up and near limits.

Recall the concerns and problems around the phony collateral loans that seems to have been subdued.
‘Ghost collateral’ haunts loans across China’s debt-laden banking system
https://www.reuters.com/investigates/sp ... eral-fake/

Anyway, I just put in another paper order sell at $392 (AH showing 392.20) and it consumed only $800 margin. That's 400-392=8, and the interest "cost" paid up front as margin. After it trades, I'm expecting $10k initial margin requirement, but I'm suspecting the maintenance margin might only be $5k. But where is the $40k going and how do finish borrowing it to pay down my mortgage or buy a new car? WTH, might as well try 100 boxes; put in a market order to sell 100 of them costing $78k max loss and generating almost $4M credit! Let's see if it goes thru...it's only paper.
outofthebox wrote: Thu Apr 08, 2021 3:41 pmI have a EUR-based account at IB, so instead of using SPX options, I opted for Eurostoxx50 options. The funny thing was, yesterday, I indeed got a -0.43% APY rate for a short box spread with options expiring Dec'22! :D
What happened to your buying power? Did it go up? Even if only 0.43%?
If you properly diversify your portfolio margin, your maintenance margin goes down quite a bit, allowing you to withdraw the money and invest it prudently into 3 brand new shiny chrome lambos w/ swangas. one foyo spouse, one foyo accountant and one foyo lawyer in case it all goes to the woodsheds.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

kellykline wrote: Sun Apr 11, 2021 12:02 pm
outofthebox wrote: Sun Apr 11, 2021 4:21 am You mean lever up in stocks, or levering up that free cash for every credit? I assume the latter:

The problem with it is that it is prevented by the initial margin, going up by about 20-25% of your credit sum. I tried it with SPX, there the effect on initial margin is barely noticeable.

It seems like they wanted to prevent exactly the scenario you describe :wink:
Do you have portfolio margin? :)
Yes.

The point I tried to make is:
When I checked a >100k USD loan with a SPX box spread, the effect on initial margin was <100 USD? Something like that. So almost no effect.
When I opened the 40k EUR credit, initial margin went up by 7200 EUR - so quite a bit. The same happened when I opened my first box spread with a 13k EUR loan - initial margin changed by even more, in this case 9000 EUR.

inbox788 wrote: Sun Apr 11, 2021 12:21 pm What happened to your buying power? Did it go up? Even if only 0.43%?
To be honest, I did not pay any attention to buying power, only to the effects on initial and maintenance margin. I can do that the next time I sell a box spread.

I 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-) ).
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