Interactive Brokers (Best Kept Secret)

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langlands
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Re: Interactive Brokers (Best Kept Secret)

Post by langlands »

rchmx1 wrote: Thu Jul 08, 2021 10:12 pm
whodidntante wrote: Thu Jul 08, 2021 8:22 pm The changes to IBKR Pro are fantastic news for those with smallish accounts who live in peanut-butter-less nations.
Try as I might I have no idea what this means. lol

Well, I went ahead a upgraded my account today. I will say, the various fees from IBKR still are kind of opaque to me, but my impression is that there was no reason to stay with the lite account. I'm nearly always carrying at least a bit of margin debt, so the lower margin rate alone seemed to make it a no brainer.
Doesn't IBKR Pro charge commissions on trades?
assyadh
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Re: Interactive Brokers (Best Kept Secret)

Post by assyadh »

whodidntante wrote: Thu Jul 08, 2021 10:33 pm
rchmx1 wrote: Thu Jul 08, 2021 10:12 pm
whodidntante wrote: Thu Jul 08, 2021 8:22 pm The changes to IBKR Pro are fantastic news for those with smallish accounts who live in peanut-butter-less nations.
Try as I might I have no idea what this means. lol

Well, I went ahead a upgraded my account today. I will say, the various fees from IBKR still are kind of opaque to me, but my impression is that there was no reason to stay with the lite account. I'm nearly always carrying at least a bit of margin debt, so the lower margin rate alone seemed to make it a no brainer.
I've sent a number of Americans out on expat assignments and foreign business trips. About the two to the three-month mark, they realize peanut butter is either not available, or what they do find is a disappointment.

There might be some exceptions, but those who love peanut butter may want to factor this in. :P

IBKR Lite is not available in all countries.
The key is to go to Asian grocery stores. They like peanut butter too :)
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

whodidntante wrote: Thu Jul 08, 2021 10:33 pm I've sent a number of Americans out on expat assignments and foreign business trips. About the two to the three-month mark, they realize peanut butter is either not available, or what they do find is a disappointment.

There might be some exceptions, but those who love peanut butter may want to factor this in. :P

IBKR Lite is not available in all countries.
Ah! The truth is simpler than where my mind was trying to take it. :P
corp_sharecropper
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Re: Interactive Brokers (Best Kept Secret)

Post by corp_sharecropper »

langlands wrote: Thu Jul 08, 2021 10:37 pm
rchmx1 wrote: Thu Jul 08, 2021 10:12 pm
whodidntante wrote: Thu Jul 08, 2021 8:22 pm The changes to IBKR Pro are fantastic news for those with smallish accounts who live in peanut-butter-less nations.
Try as I might I have no idea what this means. lol

Well, I went ahead a upgraded my account today. I will say, the various fees from IBKR still are kind of opaque to me, but my impression is that there was no reason to stay with the lite account. I'm nearly always carrying at least a bit of margin debt, so the lower margin rate alone seemed to make it a no brainer.
Doesn't IBKR Pro charge commissions on trades?
The key to minimizing exchange fees is to always send unmarketable limit orders. Many exchanges provide rebates, that are passed through, if you're adding liquidity as opposed to taking (eg. market orders or limit orders that cross the spread).
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

langlands wrote: Thu Jul 08, 2021 10:37 pm
rchmx1 wrote: Thu Jul 08, 2021 10:12 pm
whodidntante wrote: Thu Jul 08, 2021 8:22 pm The changes to IBKR Pro are fantastic news for those with smallish accounts who live in peanut-butter-less nations.
Try as I might I have no idea what this means. lol

Well, I went ahead a upgraded my account today. I will say, the various fees from IBKR still are kind of opaque to me, but my impression is that there was no reason to stay with the lite account. I'm nearly always carrying at least a bit of margin debt, so the lower margin rate alone seemed to make it a no brainer.
Doesn't IBKR Pro charge commissions on trades?
Yes. When you make the switch you have the option of selecting tiered or fixed cost for each of equities and futures. Tiered is the obvious choice (I believe) for people who aren't trading like tens or hundreds of thousands of shares per trade. Tiered has a minimum charge of 35 cents per trade. I only carry $5-10k of margin debt at a time (only have around $32k in this account), but because I don't buy/sell that frequently, the lower margin interest rate makes up for getting charged a commission on trades, assuming I've done the mental math correctly.

An open question for me is, if you don't and never plan to carry margin debt at all, is it worth it to upgrade to Pro?
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

corp_sharecropper wrote: Thu Jul 08, 2021 10:58 pm

The key to minimizing exchange fees is to always send unmarketable limit orders. Many exchanges provide rebates, that are passed through, if you're adding liquidity as opposed to taking (eg. market orders or limit orders that cross the spread).
This is interesting. As a teaching exercise, would you mind providing a quick example of what such an "unmarketable limit order" would look like? My novice assumption is that you mean a buy order well below the current bid, or a sell order well above the current ask. But my understanding falls apart when I consider the "always send" part, which to me would mean that these orders would never execute, and if that's all you're "always send[ing]," I don't understand how that would be an effective way of participating in the market.
Dagwood
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Re: Interactive Brokers (Best Kept Secret)

Post by Dagwood »

I have no issue with IBK. That being said, I have no interest in buying individual stocks and I have even less interest in borrowing on margin. Margin investing is, in my humble opinion, inappropriate for the vast majority of retail investors and inappropriate for a BH. When I was growing up, I knew at least one family that lost almost their entire savings by deciding to get involved with margin investing during the market boom of the mid 1980s. Then the correction of 1987 came. A BH investor would have used '87 as a buying opportunity and stayed the course. In the years since, I have seen this again and again, as have all of you, most recently with the COVID pandemic. The diversified buy and hold people did well. In my professional career, I have seen margin lending hurt many people as well. Unless you are running a hedge fund, stay away from margin loans or non-purpose loans. Even the "smart" guys who run hedge funds blow themselves up from time to time, mainly due to leverage and concentration risk.

The whole BH philosophy in large measure hinges on the discipline to save and invest regularly (and thus defer gratification) and to ignore the short term volatility in the market. I always look at this latter point this way: If over a 20 or 30 year period the large indices like the S&P 500, Russell 1000, the Dow, all have little or zero return, is there anywhere you are going to be able to successfully "hide"? Maybe, but the better plan, as compared to stumbling around and incurring tax and transaction costs along the way, is to do what Jack said: stay the course, stay diversified, keep costs low, and invest as regularly as you can.

That's a long way of saying that BDs that make their money on selling the ability to trade frequently at low cost and margin lending are not where I want to be.
atdharris
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Re: Interactive Brokers (Best Kept Secret)

Post by atdharris »

Are there trading fees with the IBKR Pro account? It says tiered/fixed pricing, and I am unclear to its meaning
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Re: Interactive Brokers (Best Kept Secret)

Post by LadyGeek »

Several wiki editors have updated the article (thanks!). The page was updated in several areas, not just for cost structure.

See: Interactive Brokers
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Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

rchmx1 wrote: Thu Jul 08, 2021 11:02 pm Yes. When you make the switch you have the option of selecting tiered or fixed cost for each of equities and futures. Tiered is the obvious choice (I believe) for people who aren't trading like tens or hundreds of thousands of shares per trade. Tiered has a minimum charge of 35 cents per trade. I only carry $5-10k of margin debt at a time (only have around $32k in this account), but because I don't buy/sell that frequently, the lower margin interest rate makes up for getting charged a commission on trades, assuming I've done the mental math correctly.

An open question for me is, if you don't and never plan to carry margin debt at all, is it worth it to upgrade to Pro?
What do you need out of Pro that Lite doesn't provide?

I might hold some US short-term government bonds and forex in IBKR since it is a multi-currency account. But I don't really plan to do any active trading.
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typical.investor
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Re: Interactive Brokers (Best Kept Secret)

Post by typical.investor »

wmvink wrote: Sat Mar 13, 2021 8:52 am
Kagord wrote: Sat Mar 13, 2021 8:13 am
tj wrote: Fri Mar 12, 2021 2:47 pm So, i tried to sell a mutual fund at IBKR, but it seemed to say that there's a limit of 500 shares. Why would there be a limit on the number of shares I can sell?
The warning looks like your doing something wrong, however, IB put some default precautionary settings to protect you from yourself. It's just the defaults that's causing this. In the IB Trader Workstaion Java client, click the Configure button, go to Presets, then Stocks, then scroll down to precautionary settings, you'll probably see the 500 there in the regular or algorithm config, you can change to match your risk tolerance for screwing up. I don't use the lite, buy maybe it's somewhere on the web interface too.

https://www.interactivebrokers.com/en/s ... ttings.htm
IBKR is a case study in poor UX design. For every trade, they display so many seemingly random and pointless warning messages that the user gets conditioned to ignoring them altogether.
Why is that poor UX design?

The requirement is likely to satisfy all the requirements everywhere they do business.

I don’t see global financial regulations making it easy on people and while IB might be easily able to customize their interface based on residence, I have doubts if such customization would satisfy regulators.

But yeah …
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

Marseille07 wrote: Fri Jul 09, 2021 9:18 am
rchmx1 wrote: Thu Jul 08, 2021 11:02 pm Yes. When you make the switch you have the option of selecting tiered or fixed cost for each of equities and futures. Tiered is the obvious choice (I believe) for people who aren't trading like tens or hundreds of thousands of shares per trade. Tiered has a minimum charge of 35 cents per trade. I only carry $5-10k of margin debt at a time (only have around $32k in this account), but because I don't buy/sell that frequently, the lower margin interest rate makes up for getting charged a commission on trades, assuming I've done the mental math correctly.

An open question for me is, if you don't and never plan to carry margin debt at all, is it worth it to upgrade to Pro?
What do you need out of Pro that Lite doesn't provide?

I might hold some US short-term government bonds and forex in IBKR since it is a multi-currency account. But I don't really plan to do any active trading.
Mainly just the lower interest rate for margin loans. I'm targeting the next month or so for a car purchase and plan to use a margin loan. That will be my largest use of margin to date, and I plan to hold that debt for longer than I have with my previous uses of margin (which were all short term opportunist market plays). Prior to withdrawing that margin loan I was planning to switch to Pro, but IBKR eliminating the fee seemed like a good excuse to switch now. I assume I'll stay with Pro once I've payed off the margin loan, but we'll see.

The switch has completed, and checking I'm confused as why the commission estimate is .90-1.00, which is the fixed price minimum, and not .35 which is the minimum for the tiered pricing structure and is what I selected. 100 shares as .0035 a share should be .35 commission, so where are the other .65 cents coming from? :confused
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

rchmx1 wrote: Fri Jul 09, 2021 11:07 am The switch has completed, and checking I'm confused as why the commission estimate is .90-1.00, which is the fixed price minimum, and not .35 which is the minimum for the tiered pricing structure and is what I selected. 100 shares as .0035 a share should be .35 commission, so where are the other .65 cents coming from? :confused
Hmm...I think you want to contact their support. They will respond after 3~5 business days.

Iirc I don't think you can switch back once you're on Pro.
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

Marseille07 wrote: Fri Jul 09, 2021 11:10 am
rchmx1 wrote: Fri Jul 09, 2021 11:07 am The switch has completed, and checking I'm confused as why the commission estimate is .90-1.00, which is the fixed price minimum, and not .35 which is the minimum for the tiered pricing structure and is what I selected. 100 shares as .0035 a share should be .35 commission, so where are the other .65 cents coming from? :confused
Hmm...I think you want to contact their support. They will respond after 3~5 business days.

Iirc I don't think you can switch back once you're on Pro.
Logging into my account, it seems like you can switch between pro and lite if you want. Also, while I'm 100% sure that I selected tiered when making the change last night, my account was set to fixed, hence the commission confusion. Switched it to tiered again, though looks like it might take a day to update since I'm still seeing the 1.00 commission when I make a test purchase.
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

rchmx1 wrote: Fri Jul 09, 2021 11:24 am Logging into my account, it seems like you can switch between pro and lite if you want. Also, while I'm 100% sure that I selected tiered when making the change last night, my account was set to fixed, hence the commission confusion. Switched it to tiered again, though looks like it might take a day to update since I'm still seeing the 1.00 commission when I make a test purchase.
That's good to know. IBKR's platform is really buggy. I once rage-quit when I selected USD from a pull-down menu *they provided* then flagged that USD was an invalid currency.
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

Marseille07 wrote: Fri Jul 09, 2021 11:31 am That's good to know. IBKR's platform is really buggy. I once rage-quit when I selected USD from a pull-down menu *they provided* then flagged that USD was an invalid currency.
Ya, the bugginess is a bit annoying, though luckily I haven't experienced anything horrible. But some of IBKRs features are so perfect for my use case scenario that the bugginess is doesn't bother me too much. Being able to switch from Transferwise to IBKR for my monthly foreign currency transfers saves me a couple hundred bucks a year, which makes it easy to ignore a bit of bugginess. :wink:
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

rchmx1 wrote: Fri Jul 09, 2021 12:39 pm
Marseille07 wrote: Fri Jul 09, 2021 11:31 am That's good to know. IBKR's platform is really buggy. I once rage-quit when I selected USD from a pull-down menu *they provided* then flagged that USD was an invalid currency.
Ya, the bugginess is a bit annoying, though luckily I haven't experienced anything horrible. But some of IBKRs features are so perfect for my use case scenario that the bugginess is doesn't bother me too much. Being able to switch from Transferwise to IBKR for my monthly foreign currency transfers saves me a couple hundred bucks a year, which makes it easy to ignore a bit of bugginess. :wink:
Yeah I'm planning to do the same thing, hearing good things about IBKR's monthly free wire & low pips on forex.
occambogle
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Re: Interactive Brokers (Best Kept Secret)

Post by occambogle »

The other thing worth mentioning is IBKR is very US expat friendly, and generally internationally friendly. For many US expats IBKR is literally the only "mainstream" broker that will accept them as customers. So this is great news for those with smaller balances.
Re: the differences between plans - one of the differences is that Lite offers free realtime data whereas Pro charges. But IBKR Lite is still only available to US residents, so international clients (including US citizen non-residents) still only have access to the Pro plan.
https://www.interactivebrokers.com/en/index.php?f=45500
https://www.interactivebrokers.com/en/index.php?f=45196
bling
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Re: Interactive Brokers (Best Kept Secret)

Post by bling »

corp_sharecropper wrote: Thu Jul 08, 2021 10:58 pm
langlands wrote: Thu Jul 08, 2021 10:37 pm Doesn't IBKR Pro charge commissions on trades?
The key to minimizing exchange fees is to always send unmarketable limit orders. Many exchanges provide rebates, that are passed through, if you're adding liquidity as opposed to taking (eg. market orders or limit orders that cross the spread).
does it really matter in the end? you either get executed at a better price, or you execute at the worse price but get a bigger rebate. i can't imagine it being optimal to always put in unmarketable limit orders vs market orders.
dafioram
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Re: Interactive Brokers (Best Kept Secret)

Post by dafioram »

IBKR has eliminated minimums for the pro account. before you had to have a hundred thousand or else they would charge you a $10 commission per month (with some exceptions). There is still the trading costs of course.
corp_sharecropper
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Re: Interactive Brokers (Best Kept Secret)

Post by corp_sharecropper »

bling wrote: Fri Jul 09, 2021 6:28 pm
corp_sharecropper wrote: Thu Jul 08, 2021 10:58 pm
langlands wrote: Thu Jul 08, 2021 10:37 pm Doesn't IBKR Pro charge commissions on trades?
The key to minimizing exchange fees is to always send unmarketable limit orders. Many exchanges provide rebates, that are passed through, if you're adding liquidity as opposed to taking (eg. market orders or limit orders that cross the spread).
does it really matter in the end? you either get executed at a better price, or you execute at the worse price but get a bigger rebate. i can't imagine it being optimal to always put in unmarketable limit orders vs market orders.
huh? Why would you get executed at a worse price by submitting a buy order below the ask or a sell order above the bid? Orders that get no rebate are basically ones that are executed immediately, removing liquidity from the exchange, like a market order (or limit order that crosses the spread).
taojaxx
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Re: Interactive Brokers (Best Kept Secret)

Post by taojaxx »

Sounds like there's a lot of confusion here. You only add liquidity with a limit order that's INSIDE the existing bid-ask spread. So higher than current bid, lower than current ask.
Anything else removes liquidity (Market orders) or will only become relevant once the market has moved: lower for bids lower that current bid, higher for asks higher than current ask.
Better lucky than smart.
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Re: Interactive Brokers (Best Kept Secret)

Post by LadyGeek »

The wiki has some background info: Order
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Tanelorn
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Re: Interactive Brokers (Best Kept Secret)

Post by Tanelorn »

taojaxx wrote: Sun Jul 11, 2021 7:39 pm Sounds like there's a lot of confusion here. You only add liquidity with a limit order that's INSIDE the existing bid-ask spread. So higher than current bid, lower than current ask.
Anything else removes liquidity (Market orders) or will only become relevant once the market has moved: lower for bids lower that current bid, higher for asks higher than current ask.
That’s not quite right. You can post, for example, a lowball limit buy order at $9 for a stock trading $10.00 x $10.10. If the market ever gets down to $9 and someone sells to you, you’ll have provided liquidity and get the corresponding exchange rebate if you’re on the Tiered IB Pro commission schedule.

Marketable orders take liquidity and execute immediately against an existing order. Non-marketable order are placed in the limit order book for that security and provide liquidity if they are eventually executed (not guaranteed).
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

I have a question about margin loans in a reg t account at IBKR. Up to this point I had only really been paying attention to my available margin with an eye towards using it to purchase securities. So, if I have a zero margin balance and look at my account, I see that excess liquidity is always around half of net liquidity. My understanding, then, is that if I wanted to max out margin for purchasing more securities, I have available around half of my account value. But I'm now considering taking a margin loan to purchase a vehicle. What is confusing me is that when I see how much I can withdraw using a margin loan, it is only around 1/3 of my account value. So is that just how it works at IBKR, or at all brokers? The broker will grant you a larger margin loan if you're using it to buy equities than if you're planning to withdraw the money? Is it basically 1/2 of account value when purchasing equities, or 1/3 if withdrawing? Is there anything that impacts the percentage of account value you can withdraw as a margin loan?
calwatch
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Re: Interactive Brokers (Best Kept Secret)

Post by calwatch »

Some of it may be day trading buying power. Yes, you can purchase more securities than taking the money, because money withdrawn would count under overnight margin requirements. Overnight margin is always going to be higher than during the day.

"During active market hours, IB clients can take advantage of reduced intraday margin for securities – generally 25% of the long stock value. In order to hold a position overnight, margin requirement reverts to the Reg T requirement of 50% of stock value."
https://www.interactivebrokers.com/en/? ... ntity%3Din
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

calwatch wrote: Mon Jul 19, 2021 2:56 pm Some of it may be day trading buying power. Yes, you can purchase more securities than taking the money, because money withdrawn would count under overnight margin requirements. Overnight margin is always going to be higher than during the day.

"During active market hours, IB clients can take advantage of reduced intraday margin for securities – generally 25% of the long stock value. In order to hold a position overnight, margin requirement reverts to the Reg T requirement of 50% of stock value."
https://www.interactivebrokers.com/en/? ... ntity%3Din
Thanks for the response. I guess I just don't have a clear understanding of why I'm able to withdraw significantly less than what I could use to purchase additional securities. It seems like I can withdraw around 30% less compared to what is listed as excess liquidity in my account. I've read through that link before, and the bolded part made me assume that I would be able to withdraw 50% of stock value, but instead it's around 40% of account value. Do the types of securities you hold in your account have an effect? So a more volatile/risky etf would be treated as riskier collateral, reducing the size of the margin loan you could withdraw?
calwatch
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Re: Interactive Brokers (Best Kept Secret)

Post by calwatch »

rchmx1 wrote: Mon Jul 19, 2021 3:14 pm
calwatch wrote: Mon Jul 19, 2021 2:56 pm Some of it may be day trading buying power. Yes, you can purchase more securities than taking the money, because money withdrawn would count under overnight margin requirements. Overnight margin is always going to be higher than during the day.

"During active market hours, IB clients can take advantage of reduced intraday margin for securities – generally 25% of the long stock value. In order to hold a position overnight, margin requirement reverts to the Reg T requirement of 50% of stock value."
https://www.interactivebrokers.com/en/? ... ntity%3Din
Thanks for the response. I guess I just don't have a clear understanding of why I'm able to withdraw significantly less than what I could use to purchase additional securities. It seems like I can withdraw around 30% less compared to what is listed as excess liquidity in my account. I've read through that link before, and the bolded part made me assume that I would be able to withdraw 50% of stock value, but instead it's around 40% of account value. Do the types of securities you hold in your account have an effect? So a more volatile/risky etf would be treated as riskier collateral, reducing the size of the margin loan you could withdraw?
The definition of "current available funds" is equity with loan value (ELV) minus initial margin while excess liquidity (which is greater than current available funds) is ELV minus *maintenance* margin. And buying power is current available funds times 4, which is the reciprocal of the 25% maintenance margin rate, and thus would be greater than excess liquidity - but much of this buying power expires at the close of each trading day.
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Re: Interactive Brokers (Best Kept Secret)

Post by saver007 »

rchmx1 wrote: Mon Jul 19, 2021 3:14 pm Do the types of securities you hold in your account have an effect? So a more volatile/risky etf would be treated as riskier collateral, reducing the size of the margin loan you could withdraw?
[ quote fixed by admin LadyGeek]

Yes, securities could effect margin requirements. IB can charge higher than 50% reg T margin on securities they seem high risk.

I suggest you look at your IB Margin statement for additional insight. Margin statement should show maintenance margin % per securiy. If any of your holdings has higher than 25% standard maintenance , it is a pretty good indication that it's reg t margin also may be higher than 50%.

Also there is a 2k equity threshold for margin accounts.. so IB won't allow cash withdrawal that decreases your equity further below 2k.
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

saver007 wrote: Mon Jul 19, 2021 4:15 pm Yes, securities could effect margin requirements. IB can charge higher than 50% reg T margin on securities they seem high risk.

I suggest you look at your IB Margin statement for additional insight. Margin statement should show maintenance margin % per securiy. If any of your holdings has higher than 25% standard maintenance , it is a pretty good indication that it's reg t margin also may be higher than 50%.

Also there is a 2k equity threshold for margin accounts.. so IB won't allow cash withdrawal that decreases your equity further below 2k.
Thank you for pointing me in the direction of that report. I had never checked out the "Other Reports" section, that's very helpful.

To make sure I understand the bolded portion of your post, imagine I have $20k of equities in my IBKR account in a "low risk" etf. I might expect to be able to withdraw 50% of that, so $10k. But does the bolded part mean that I would be limited to withdrawing $8k? Is that the effect of the "2k equity threshold" you mentioned?
saver007
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Re: Interactive Brokers (Best Kept Secret)

Post by saver007 »

rchmx1 wrote: Mon Jul 19, 2021 4:54 pm
saver007 wrote: Mon Jul 19, 2021 4:15 pm Yes, securities could effect margin requirements. IB can charge higher than 50% reg T margin on securities they seem high risk.

I suggest you look at your IB Margin statement for additional insight. Margin statement should show maintenance margin % per securiy. If any of your holdings has higher than 25% standard maintenance , it is a pretty good indication that it's reg t margin also may be higher than 50%.

Also there is a 2k equity threshold for margin accounts.. so IB won't allow cash withdrawal that decreases your equity further below 2k.
Thank you for pointing me in the direction of that report. I had never checked out the "Other Reports" section, that's very helpful.

To make sure I understand the bolded portion of your post, imagine I have $20k of equities in my IBKR account in a "low risk" etf. I might expect to be able to withdraw 50% of that, so $10k. But does the bolded part mean that I would be limited to withdrawing $8k? Is that the effect of the "2k equity threshold" you mentioned?
No, in that example 2k minimum equity threshold won't be a limiting factor.. 10k equity after withdrawal is still higher than 2k minimum.. so you should be able to withdraw 10k
I guess 2k threshold is only a factor if your total account value is low like less than 4k.. for example if your total account value is 3k , you will be limited to withdrawing withdrawing only 1k instead of 1.5k because 3k-1k =2k . Your margin account value cannot go below 2k due to a withdrawal..
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

saver007 wrote: Mon Jul 19, 2021 7:51 pm
No, in that example 2k minimum equity threshold won't be a limiting factor.. 10k equity after withdrawal is still higher than 2k minimum.. so you should be able to withdraw 10k
I guess 2k threshold is only a factor if your total account value is low like less than 4k.. for example if your total account value is 3k , you will be limited to withdrawing withdrawing only 1k instead of 1.5k because 3k-1k =2k . Your margin account value cannot go below 2k due to a withdrawal..
Ah ok, thanks for the clarification. I knew it had to be one of those two interpretations.

So as it turns out, a big part of my confusion was a result of the length it takes for transferred funds to be available for various purposes. I had initiated a bill pay to my IBKR account which cleared last Thursday, and which I had assumed would be available for all purposes by today at the latest. So checking my "Cash Available for Withdrawal (assuming margin loan)" and seeing it barely increase confused me. But now I realize I need to give it 4 full business days. Checking it now, the "Cash Available for Withdrawal (assuming margin loan)" has increased the expected amount. Mystery solved, and a reminder not to be so impatient. :beer
tomsense76
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Re: Interactive Brokers (Best Kept Secret)

Post by tomsense76 »

Is there anything special one needs to do to tell IBKR to use SpecID for cost basis? Or does that just happen automatically? Wasn't seeing a setting and didn't find an answer when searching the help or the BH forum, but I could easily be overlooking something. Thanks in advance! :happy
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dafioram
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Re: Interactive Brokers (Best Kept Secret)

Post by dafioram »

tomsense76 wrote: Tue Jul 20, 2021 7:37 pm Is there anything special one needs to do to tell IBKR to use SpecID for cost basis? Or does that just happen automatically? Wasn't seeing a setting and didn't find an answer when searching the help or the BH forum, but I could easily be overlooking something. Thanks in advance! :happy
In the app go to account management and then tax optimizer. There you can select default lot selection methods for each held security. Or assign recently closed sales to one of the cost selection methods. I'm not sure how to do a system wide default cost basis selection. You may have to wait a little bit after a sale before you will see that sale in the optimizer for cost basis assignment.
tomsense76
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Re: Interactive Brokers (Best Kept Secret)

Post by tomsense76 »

dafioram wrote: Tue Jul 20, 2021 7:49 pm
tomsense76 wrote: Tue Jul 20, 2021 7:37 pm Is there anything special one needs to do to tell IBKR to use SpecID for cost basis? Or does that just happen automatically? Wasn't seeing a setting and didn't find an answer when searching the help or the BH forum, but I could easily be overlooking something. Thanks in advance! :happy
In the app go to account management and then tax optimizer. There you can select default lot selection methods for each held security. Or assign recently closed sales to one of the cost selection methods. I'm not sure how to do a system wide default cost basis selection. You may have to wait a little bit after a sale before you will see that sale in the optimizer for cost basis assignment.
Ah ok, thanks! So does that mean IBKR is always tracking the cost basis of each lot? Or does one need to configure that in advance?
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atdharris
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Re: Interactive Brokers (Best Kept Secret)

Post by atdharris »

Well, I think I am making the switch from M1 for my leverage money. IBKR has lower rates and they won't charge me an annual fee like M1 does for their 2% margin rate. I don't plan to do much trading, but I will buy a good lot of NTSX.
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dc93
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Re: Interactive Brokers (Best Kept Secret)

Post by dc93 »

atdharris wrote: Wed Jul 21, 2021 5:34 pm Well, I think I am making the switch from M1 for my leverage money. IBKR has lower rates and they won't charge me an annual fee like M1 does for their 2% margin rate. I don't plan to do much trading, but I will buy a good lot of NTSX.
Just curious, have you made the switch yet? I am thinking about the same as well, but have never transferred an account with margin.
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

dc93 wrote: Sun Aug 01, 2021 8:55 am
atdharris wrote: Wed Jul 21, 2021 5:34 pm Well, I think I am making the switch from M1 for my leverage money. IBKR has lower rates and they won't charge me an annual fee like M1 does for their 2% margin rate. I don't plan to do much trading, but I will buy a good lot of NTSX.
Just curious, have you made the switch yet? I am thinking about the same as well, but have never transferred an account with margin.
I transferred my brokerage account from Schwab to IBKR a year ago, at least in part to take advantage of the better margin offerings of IBKR. What do you want to know? It was a simple and straightforward process.
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Re: Interactive Brokers (Best Kept Secret)

Post by atdharris »

dc93 wrote: Sun Aug 01, 2021 8:55 am
atdharris wrote: Wed Jul 21, 2021 5:34 pm Well, I think I am making the switch from M1 for my leverage money. IBKR has lower rates and they won't charge me an annual fee like M1 does for their 2% margin rate. I don't plan to do much trading, but I will buy a good lot of NTSX.
Just curious, have you made the switch yet? I am thinking about the same as well, but have never transferred an account with margin.
I just opened an account and put some money there. I have not transferred my fund at M1 over yet. The interface is certainly less user friendly and somewhat wonky, but it's something I can deal with for lower rates and no $125/year annual fee.
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Re: Interactive Brokers (Best Kept Secret)

Post by Nathan Drake »

How much cheaper is IB’d margin? Is it variable like M1?

I just signed up to M1 and was intrigued by the margin rates
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saver007
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Re: Interactive Brokers (Best Kept Secret)

Post by saver007 »

It's start at 1.6% and then go lower upto .75% depending on margin balance under IBKR Pro .Yea it is variable based on fed funds rate.

If you use promotion from stockbrokers.com to open IB account, you can start at 1.1% instead of 1.6%.. at least used to ..not sure if the promotion is still valid.
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Re: Interactive Brokers (Best Kept Secret)

Post by atdharris »

Nathan Drake wrote: Tue Aug 03, 2021 4:43 pm How much cheaper is IB’d margin? Is it variable like M1?

I just signed up to M1 and was intrigued by the margin rates
I believe they start at 1.6% and go lower. M1 is 2% but you have to pay a $125 AF (first year is free) and you are limited to 35% max of your account size. If you don't pay the $125, it's 3.5% at M1
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Re: Interactive Brokers (Best Kept Secret)

Post by atdharris »

Part of me just wants to move my emergency cash into NTSX at IBKR and then borrow against it if I ever actually have an emergency and pay whatever rate at 1.6% or less. Risky, I know, but tempting.
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Re: Interactive Brokers (Best Kept Secret)

Post by whodidntante »

atdharris wrote: Tue Aug 03, 2021 6:03 pm Part of me just wants to move my emergency cash into NTSX at IBKR and then borrow against it if I ever actually have an emergency and pay whatever rate at 1.6% or less. Risky, I know, but tempting.
I do something similar (sans the NTSX). My taxable portfolio is in equity index ETFs. Unexpected lumpy expenses either go on my credit cards (I almost always have a 0% purchase APR active due to CC churning) or a margin loan at IB. I can also just sell and then trade in my 401k to restore my desired asset allocation if the tax cost is acceptable.
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

More or less what I do too. I have a small EF of cash in my Schwab checking account, just as another way of getting a bit of cash if I need it, being an expat. But otherwise I just treat the margin available from my IBKR taxable account as my EF. I think the riskiness depends a lot on your life situation. Job stability, monthly expenses, number of kids, age and health issues etc. For me, my life risk is about as low as it gets, so I'm more than comfortable with the risk aspect of taking this approach to my EF.
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Re: Interactive Brokers (Best Kept Secret)

Post by Nathan Drake »

atdharris wrote: Tue Aug 03, 2021 5:48 pm
Nathan Drake wrote: Tue Aug 03, 2021 4:43 pm How much cheaper is IB’d margin? Is it variable like M1?

I just signed up to M1 and was intrigued by the margin rates
I believe they start at 1.6% and go lower. M1 is 2% but you have to pay a $125 AF (first year is free) and you are limited to 35% max of your account size. If you don't pay the $125, it's 3.5% at M1
I made a thread recently about using Margin since I have a new M1 account. I'm a little too scared to start dabbling in this, but it is enticing. I don't mind the $125 fee because I like the Smart Transfers that they offer which allows me to keep my checking account balance extremely low and have all my ETF fractional share purchases on autopilot. The 1% I get on my checking account is good too, and counteracts some of the fee. I like the Credit Card idea of automatic investments of points...basically the whole concept of keeping it all on autopilot so I think I'll continue paying the M1+ in the future (I have the first year free)

But for Margin? Still pretty undecided...

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dafioram
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Re: Interactive Brokers (Best Kept Secret)

Post by dafioram »

If I'm borrowing 20k from ibkr using ibkr lite then thats a rate of 2.6% and if i switch it Ibkr pro then thats a rate of 1.1% for over 100k equity. So a rate difference of 1.5% or yearly interest difference of $300. Since ibkr pro tier has 0.35$ transaction fee that means I need to do less than 857 trades in a year. Does that sound right?
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Re: Interactive Brokers (Best Kept Secret)

Post by hithere »

Dagwood wrote: Fri Jul 09, 2021 5:32 am I have no issue with IBK. That being said, I have no interest in buying individual stocks and I have even less interest in borrowing on margin. Margin investing is, in my humble opinion, inappropriate for the vast majority of retail investors and inappropriate for a BH. When I was growing up, I knew at least one family that lost almost their entire savings by deciding to get involved with margin investing during the market boom of the mid 1980s. Then the correction of 1987 came. A BH investor would have used '87 as a buying opportunity and stayed the course. In the years since, I have seen this again and again, as have all of you, most recently with the COVID pandemic. The diversified buy and hold people did well. In my professional career, I have seen margin lending hurt many people as well. Unless you are running a hedge fund, stay away from margin loans or non-purpose loans. Even the "smart" guys who run hedge funds blow themselves up from time to time, mainly due to leverage and concentration risk.

The whole BH philosophy in large measure hinges on the discipline to save and invest regularly (and thus defer gratification) and to ignore the short term volatility in the market. I always look at this latter point this way: If over a 20 or 30 year period the large indices like the S&P 500, Russell 1000, the Dow, all have little or zero return, is there anywhere you are going to be able to successfully "hide"? Maybe, but the better plan, as compared to stumbling around and incurring tax and transaction costs along the way, is to do what Jack said: stay the course, stay diversified, keep costs low, and invest as regularly as you can.

That's a long way of saying that BDs that make their money on selling the ability to trade frequently at low cost and margin lending are not where I want to be.
Salt makes food much tastier, but can lead to intoxication and death at high enough doses. I believe the old adage that the dose makes the poison is applicable to margin as well. Everyone talks about how they know people who got wiped out because of margin. Well, plenty of people have died of salt poisoning as well - does that mean that we shouldn't consume salt at all? Of course not. Using obscene amounts of margin (and, to an extent, leverage in general) without regard for the risks is a financial suicide. Using a little bit of margin with well-diversified ETFs is okay and provides a good boost in long-term returns.
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Re: Interactive Brokers (Best Kept Secret)

Post by atdharris »

Is there a minimum you need to deposit to use margin? I put $500 into my new account just to test it out and it shows my buying power as only $500.
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Re: Interactive Brokers (Best Kept Secret)

Post by JackoC »

hithere wrote: Wed Aug 04, 2021 7:34 am
Dagwood wrote: Fri Jul 09, 2021 5:32 am I have no issue with IBK. That being said, I have no interest in buying individual stocks and I have even less interest in borrowing on margin. Margin investing is, in my humble opinion, inappropriate for the vast majority of retail investors and inappropriate for a BH.

The whole BH philosophy in large measure hinges on the discipline to save and invest regularly (and thus defer gratification) and to ignore the short term volatility in the market. I always look at this latter point this way: If over a 20 or 30 year period the large indices like the S&P 500, Russell 1000, the Dow, all have little or zero return, is there anywhere you are going to be able to successfully "hide"? Maybe, but the better plan, as compared to stumbling around and incurring tax and transaction costs along the way, is to do what Jack said: stay the course, stay diversified, keep costs low, and invest as regularly as you can.

That's a long way of saying that BDs that make their money on selling the ability to trade frequently at low cost and margin lending are not where I want to be.
Salt makes food much tastier, but can lead to intoxication and death at high enough doses. I believe the old adage that the dose makes the poison is applicable to margin as well. Everyone talks about how they know people who got wiped out because of margin. Well, plenty of people have died of salt poisoning as well - does that mean that we shouldn't consume salt at all? Of course not. Using obscene amounts of margin (and, to an extent, leverage in general) without regard for the risks is a financial suicide. Using a little bit of margin with well-diversified ETFs is okay and provides a good boost in long-term returns.
I agree. Though I would say previous posters first statement, if limited to 'majority' not 'vast majority' could practically be true. The statement it's 'against BH principal' and whole second paragraph is off base though IMO. It makes various unstated assumptions what the margin borrowing is used for which are not necessarily true, even besides the issue of 'how much'.

Besides just having a leveraged stock position, another straight forward and entirely BH ('minimize costs') application of margin lending is if you have rental real estate (many people on this forum are super stock fans and despise DIY real estate...but that's not a general BH principal, not a valid one anyway). You can have ETF assets in your RE LLC, then borrow against those with IBKR to finance properties at much lower rates than banks charge against the properties themselves, at least for some of your borrowing. As a business expense there's no question about full deductibility of interest cost as there can be with personal margin loans. And there's no reasonable argument against using some leverage in RE investing.

Another as has been covered on many threads is the potential advantage in later life of borrowing against a large appreciated asset position you intend to mainly leave to heirs, rather than liquidating part and paying capital gains tax which the heirs could avoid via the 'basis step up' feature of the current tax code. It does depend on assuming that feature will remain part of the code until your death, IOW it's not a riskless strategy, but it does not in any way involve 'getting in over your head'.

And a simpler benefit is that if you have marginable assets at IBKR and need money in an emergency, you can borrow some amount at a low interest rate. That can substitute for at least *some* of any liquidity reserve ('emergency fund', etc) you'd otherwise set aside earning a low interest rate. Some amount depending on tolerance of risk that the liquidity won't be there when you need it. For example if you assume you'll be able to borrow 20% of your current asset value at IBKR (their current limit is ~75%), you're making a very low risk assumption. The 75% is model based and likely to decline in times of very high volatility, but even were their limit to go all the way down to 50% of value and market value also drop 50%, you could still borrow >20% of the original value. Nor are other forms of contingent liquidity certain so that's not the correct benchmark for comparison. A bank can easily cancel a HELOC when something happens to your credit, or it just wants to reduce its exposure to that business, something which actually happens, whereas broker margin lenders pulling out of that business is a hypothetical and they basically don't care about your personal credit. Of course just having the liquidity in the bank now doesn't present any risk of a lender canceling your borrowing facility, but has an opportunity cost. Fortunately you don't have to address contingent liquidity with just one solution. But planning to borrow a fairly small % of your asset value at IBKR, in an emergency, can be part of your strategy, with no costs unless/until you borrow.
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