Interactive Brokers (Best Kept Secret)

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rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

When you first create an account with IBKR, do that put you in paper trading mode until you actually transfer money/positions into the account? I only created my account this afternoon, and while I initiated a transfer of a position it'll take a few days to go through, so I'm assuming it just takes a bit for everything to get set up. I just find it a little confusing that when I open the Trader Workstation, making sure I've logged in as a live account, it puts me in paper trading mode. Was wondering if I was missing something, or if I just need to be more patient.
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Steve Reading
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Re: Interactive Brokers (Best Kept Secret)

Post by Steve Reading »

rchmx1 wrote: Wed Sep 02, 2020 10:55 pm When you first create an account with IBKR, do that put you in paper trading mode until you actually transfer money/positions into the account? I only created my account this afternoon, and while I initiated a transfer of a position it'll take a few days to go through, so I'm assuming it just takes a bit for everything to get set up. I just find it a little confusing that when I open the Trader Workstation, making sure I've logged in as a live account, it puts me in paper trading mode. Was wondering if I was missing something, or if I just need to be more patient.
That's normal.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
bling
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Re: Interactive Brokers (Best Kept Secret)

Post by bling »

just opened my account the other day. primary reason being access to cheap margin if i ever need it. i was planning on using it for more things but doesn't look like that'll be possible. i know they don't advertise it at all, but if "checkings replacement" was in your mind they don't offer anything that comes close to being able to replace it...

1. bill pay is not free.

2. outgoing transfers are only free once a month.

3. no check writing at all.

4. incoming transfers are subject to a trading hold. you can simulate a bill payment but that's at least 1 business day as well. so if you're the type to buy the day you're paid, that's not possible here.

every broker i've used in the past had all of the above so i was pretty surprised to discover i took all of these things for granted.

it feels weird but i'll probably end up buying with my existing broker, and then use ACATS to pull into my IB account (all of my brokers have free partial transfer out), just to avoid being out the market for a couple days.
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Steve Reading
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Re: Interactive Brokers (Best Kept Secret)

Post by Steve Reading »

bling wrote: Sun Sep 06, 2020 2:34 pm just opened my account the other day. primary reason being access to cheap margin if i ever need it. i was planning on using it for more things but doesn't look like that'll be possible. i know they don't advertise it at all, but if "checkings replacement" was in your mind they don't offer anything that comes close to being able to replace it...

1. bill pay is not free.

2. outgoing transfers are only free once a month.

3. no check writing at all.

4. incoming transfers are subject to a trading hold. you can simulate a bill payment but that's at least 1 business day as well. so if you're the type to buy the day you're paid, that's not possible here.

every broker i've used in the past had all of the above so i was pretty surprised to discover i took all of these things for granted.

it feels weird but i'll probably end up buying with my existing broker, and then use ACATS to pull into my IB account (all of my brokers have free partial transfer out), just to avoid being out the market for a couple days.
Im not sure what you mean by Bill Pay, but it’s possible to transfer money to IB via your bank’s bill pay (you just add IB as a vendor). The transfer takes a couple of days and is completely free. That’s what I do with every paycheck. And you can make it automatic as well
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
Tingting1013
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Re: Interactive Brokers (Best Kept Secret)

Post by Tingting1013 »

bling wrote: Sun Sep 06, 2020 2:34 pm just opened my account the other day. primary reason being access to cheap margin if i ever need it. i was planning on using it for more things but doesn't look like that'll be possible. i know they don't advertise it at all, but if "checkings replacement" was in your mind they don't offer anything that comes close to being able to replace it...

1. bill pay is not free.

2. outgoing transfers are only free once a month.

3. no check writing at all.

4. incoming transfers are subject to a trading hold. you can simulate a bill payment but that's at least 1 business day as well. so if you're the type to buy the day you're paid, that's not possible here.

every broker i've used in the past had all of the above so i was pretty surprised to discover i took all of these things for granted.

it feels weird but i'll probably end up buying with my existing broker, and then use ACATS to pull into my IB account (all of my brokers have free partial transfer out), just to avoid being out the market for a couple days.
You can direct deposit your paycheck into your IB account.
AlohaJoe
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Re: Interactive Brokers (Best Kept Secret)

Post by AlohaJoe »

bling wrote: Sun Sep 06, 2020 2:34 pm 1. bill pay is not free.

2. outgoing transfers are only free once a month.

3. no check writing at all.

4. incoming transfers are subject to a trading hold. you can simulate a bill payment but that's at least 1 business day as well. so if you're the type to buy the day you're paid, that's not possible here.

every broker i've used in the past had all of the above
What brokerages offer all of that? I've used Vanguard, Schwab, and Wells Fargo brokerages in the past and none of them offered all of that.
bling
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Re: Interactive Brokers (Best Kept Secret)

Post by bling »

Steve Reading wrote: Sun Sep 06, 2020 8:49 pm Im not sure what you mean by Bill Pay, but it’s possible to transfer money to IB via your bank’s bill pay (you just add IB as a vendor). The transfer takes a couple of days and is completely free. That’s what I do with every paycheck. And you can make it automatic as well
as in paying your credit card bill from your IB account. it costs 50 cents to do this at IB. you can do it in reverse, which is one of the ways to fund the account, but then you're out of the market for that many days.
AlohaJoe wrote: Sun Sep 06, 2020 10:06 pm
bling wrote: Sun Sep 06, 2020 2:34 pm 1. bill pay is not free.

2. outgoing transfers are only free once a month.

3. no check writing at all.

4. incoming transfers are subject to a trading hold. you can simulate a bill payment but that's at least 1 business day as well. so if you're the type to buy the day you're paid, that's not possible here.

every broker i've used in the past had all of the above
What brokerages offer all of that? I've used Vanguard, Schwab, and Wells Fargo brokerages in the past and none of them offered all of that.
tdameritrade, merrill edge, fidelity offers all of that for free. they'll even mail you the checkbook for free. i don't know if #4 is a problem with other brokers as my paycheck goes into the same account making the same-day trade, but i think that's a reasonable safety measure (for the broker) if you're pulling funds.
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Raraculus
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Re: Interactive Brokers (Best Kept Secret)

Post by Raraculus »

How does buying on margin work? I have never used margin before, and this is one of the reasons why I signed up for Interactive Brokers.

Let's say I have $2,000 (cash) at Interactive Brokers. It says I have $8,000 'buying power'.

I tried to simulate a purchase of VTSAX for $3,000. That implies I would use $1,000 from my margin account in addition to the $2,000 cash to pay for this. It didn't work?!?

Fiddling around with simulated purchases, it appears I can use margin up to $500 dollars. So, I could buy VTSAX for $2,500, using $2,000 cash to pay for the remainder.

In this case, 'buying power' is limited to 25% of my portfolio? Is this my correct understanding?
corp_sharecropper
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Re: Interactive Brokers (Best Kept Secret)

Post by corp_sharecropper »

Raraculus wrote: Thu Sep 17, 2020 2:45 pm How does buying on margin work? I have never used margin before, and this is one of the reasons why I signed up for Interactive Brokers.

Let's say I have $2,000 (cash) at Interactive Brokers. It says I have $8,000 'buying power'.

I tried to simulate a purchase of VTSAX for $3,000. That implies I would use $1,000 from my margin account in addition to the $2,000 cash to pay for this. It didn't work?!?

Fiddling around with simulated purchases, it appears I can use margin up to $500 dollars. So, I could buy VTSAX for $2,500, using $2,000 cash to pay for the remainder.

In this case, 'buying power' is limited to 25% of my portfolio? Is this my correct understanding?
VTSAX is a mutual fund which I don't believe is margineable for at least 30 days. Have you tried with VTI?
corp_sharecropper
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Re: Interactive Brokers (Best Kept Secret)

Post by corp_sharecropper »

Raraculus wrote: Thu Sep 17, 2020 2:45 pm How does buying on margin work? I have never used margin before, and this is one of the reasons why I signed up for Interactive Brokers.

Let's say I have $2,000 (cash) at Interactive Brokers. It says I have $8,000 'buying power'.

I tried to simulate a purchase of VTSAX for $3,000. That implies I would use $1,000 from my margin account in addition to the $2,000 cash to pay for this. It didn't work?!?

Fiddling around with simulated purchases, it appears I can use margin up to $500 dollars. So, I could buy VTSAX for $2,500, using $2,000 cash to pay for the remainder.

In this case, 'buying power' is limited to 25% of my portfolio? Is this my correct understanding?
What I meant by margineable after 30 days (I'm basing this off experience at a different brokerage, in terms of MF's vis-a-vis margin) is that you should be able to buy $2K of VTSAX (assuming no fees) but it will probably be considered a cash holding. After 30-days, it would be journaled to margin which would allow you to buy more but it's tricky if it's unmarginable, the math is different. In this scenario you'd probably only be able buy $1K additional of a non-margineable security after the originally purchased securities journaled to margin. Again, this may not be exactly right for IB, but this is how MF's are treated in a margin account at Fidelity. I have never tried to purchase a MF in my Interactive Brokers account.

If you were to use a margineable ETF (something liquid and not considered unusually risky like a levered/inverse ETF) you would be able to technically hold a maximum of $4K in securities overnight (could go up to $8K if you were going to close the positions before the end of trading). However, that would be "not smart" as a one tick down would put you in a margin call and IB likely would automatically liquidate your positions to bring you into compliance. This is for RegT margin (which $2K is the bare minimum I believe). In fact, it's probably incredibly dumb to use any margin with only $2K as you might get liquidated if the account just drops below $2K.

I will tell you something that I had to learn over time and after a lot of thinking/research. While IB is enticing due to its margin interest rates, you need to really evaluate the purpose of the margin you intend to use. Margin is great for potential and responsible use as a low interest line of credit for a purchase (I mean withdrawing money to buy something outside of the investment world), for shorting individual stocks if that's the sort of "trader" you are, or being opportunistic about buying a individual stocks that don't have a liquid option chain. However, it really doesn't make sense at all if your investment plans revolve around popular/liquid individual stocks or index ETF's if they have a liquid option chain or equity index futures available. So things like S&P500, Russell 2K, nasdaq-100, 2/5/10/30 year treasuries all have futures that are cheaper to use as leverage than even IB's margin rates. And most of the household name stocks have decent options that can give you leverage and there are also plenty of ETFs with options. The order of my preference (and while it is my "preference" the math is undeniable) is futures are the best, if for some reason futures aren't available or if say the notional value of the futures contract is too large for your account, options would be the next best solution. Only if those two things can't be utilized does it really make sense to use broker margin. I haven't and can't foresee myself ever directly shorting a security directly. If I were to ever be bearish enough about a stock/sector enough to do anything about it, I'd probably sell call options or buy put options instead.


ETA: I would advise that you utilize paper trading offered by both IB and Thinkorswim (TDAmeritrade) for a few months to get a feel for how margin works. It's not as straight forward and clear cut as all the lazy guides/blogs would suggest that use a 1 holding example to illustrate (this really frustrates me, I think sometimes the writers of those "how margin works" guides don't really understand margin themselves and so just parrot the same "buy $20K of stock XYZ with your $10K account" example from each other). I know with Thinkorswim you can even make the papertrade account use Portfolio Margin, which is a totally different animal than RegT margin, if that's something that interests you. I don't know if IB's paper trading supports portfolio margin. Try to check in on your paper account as often or more than you do your real account, it won't help you if you blow it off as not real money and don't follow along closely.
michaeljc70
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Re: Interactive Brokers (Best Kept Secret)

Post by michaeljc70 »

So, I recently transferred my taxable account it IB for their low margin rates. The "best kept secret" is they don't let you withdraw any cash for 30 days which is contrary to their website (which says 10 business days). They assured me they will be updating the website "soon". So, I have $40k sitting there that I sort of need and cannot get because of this unwritten rule. I've been with many brokerages over the years and never encountered such a thing. To add insult to injury, I escalated the issue (since the website was out of date) and was told they are looking into and will let me know in 15-20 business days (after my hold is over). I told them thanks for nothing.

If you can use the great margin rates it can be a good deal, but they are geared toward pros more than a guy that rebalances a few ETFs once a year.

I am using the margin to payoff my mortgage (yes, I know the risks... there are multiple threads on it......using a conservative leverage ratio).
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Raraculus
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Re: Interactive Brokers (Best Kept Secret)

Post by Raraculus »

corp_sharecropper wrote: Thu Sep 17, 2020 3:09 pmWhat I meant by margineable after 30 days (I'm basing this off experience at a different brokerage, in terms of MF's vis-a-vis margin) is that you should be able to buy $2K of VTSAX (assuming no fees) but it will probably be considered a cash holding.
Ah, I suspect that this could be an issue. VTSAX has a $3K account minimum. I was hoping to use $2K in cash and $1K on margin to make my initial VTSAX purchase. I guess I've gotta wait for another payday and open an initial VTSAX holding outright at $3k.
Margin is great for potential and responsible use as a low interest line of credit for a purchase (I mean withdrawing money to buy something outside of the investment world)
This is what I'm hoping to use it for. For example, I have a kitchen remodeling project - and eventually, I hope to be able to use margin to finance the project.

From my understanding, margin debt can be incurred on two ways - credit or securities purchase;

Credit debt incurred on margin does not have tax deductible interest. Credit debt incurred on Margin does not gain/lose in value. Credit debt incurred on margin does not receive dividends.

Securities purchased on margin has tax deductible interest. Securities purchased on margin can gain/lose in value. Securities purchased on margin can receive dividends.

I just wanted to do both to get a good feel on how margin debt can be used effectively in my investment plans.
ETA: I would advise that you utilize paper trading offered by both IB and Thinkorswim (TDAmeritrade) for a few months to get a feel for how margin works. It's not as straight forward and clear cut as all the lazy guides/blogs would suggest that use a 1 holding example to illustrate (this really frustrates me, I think sometimes the writers of those "how margin works" guides don't really understand margin themselves and so just parrot the same "buy $20K of stock XYZ with your $10K account" example from each other).
Thanks for the advice. It is very much helpful. I will do a couple more simulations first before I commit.
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Steve Reading
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Re: Interactive Brokers (Best Kept Secret)

Post by Steve Reading »

corp_sharecropper wrote: Thu Sep 17, 2020 3:09 pm However, it really doesn't make sense at all if your investment plans revolve around popular/liquid individual stocks or index ETF's if they have a liquid option chain or equity index futures available. So things like S&P500, Russell 2K, nasdaq-100, 2/5/10/30 year treasuries all have futures that are cheaper to use as leverage than even IB's margin rates. And most of the household name stocks have decent options that can give you leverage and there are also plenty of ETFs with options. The order of my preference (and while it is my "preference" the math is undeniable) is futures are the best, if for some reason futures aren't available or if say the notional value of the futures contract is too large for your account, options would be the next best solution. Only if those two things can't be utilized does it really make sense to use broker margin.
For some of us, leveraging in taxable accounts, the tax drawbacks of futures and options are high enough that using margin actually is cheaper after-tax. I use margin to buy index ETFs like VTI and SPY.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
corp_sharecropper
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Re: Interactive Brokers (Best Kept Secret)

Post by corp_sharecropper »

Raraculus wrote: Thu Sep 17, 2020 6:10 pm
corp_sharecropper wrote: Thu Sep 17, 2020 3:09 pmWhat I meant by margineable after 30 days (I'm basing this off experience at a different brokerage, in terms of MF's vis-a-vis margin) is that you should be able to buy $2K of VTSAX (assuming no fees) but it will probably be considered a cash holding.
Ah, I suspect that this could be an issue. VTSAX has a $3K account minimum. I was hoping to use $2K in cash and $1K on margin to make my initial VTSAX purchase. I guess I've gotta wait for another payday and open an initial VTSAX holding outright at $3k.
Margin is great for potential and responsible use as a low interest line of credit for a purchase (I mean withdrawing money to buy something outside of the investment world)
This is what I'm hoping to use it for. For example, I have a kitchen remodeling project - and eventually, I hope to be able to use margin to finance the project.

From my understanding, margin debt can be incurred on two ways - credit or securities purchase;

Credit debt incurred on margin does not have tax deductible interest. Credit debt incurred on Margin does not gain/lose in value. Credit debt incurred on margin does not receive dividends.

Securities purchased on margin has tax deductible interest. Securities purchased on margin can gain/lose in value. Securities purchased on margin can receive dividends.

I just wanted to do both to get a good feel on how margin debt can be used effectively in my investment plans.
ETA: I would advise that you utilize paper trading offered by both IB and Thinkorswim (TDAmeritrade) for a few months to get a feel for how margin works. It's not as straight forward and clear cut as all the lazy guides/blogs would suggest that use a 1 holding example to illustrate (this really frustrates me, I think sometimes the writers of those "how margin works" guides don't really understand margin themselves and so just parrot the same "buy $20K of stock XYZ with your $10K account" example from each other).
Thanks for the advice. It is very much helpful. I will do a couple more simulations first before I commit.
In response to the bolded part, no, the VTSAX minimum you see on Vanguard may or may not have anything to do with the fact that you weren't able to purchase it. Sometimes mutual funds have stated minimums, from the issuer, that don't apply at all through the end broker. But that is beside the point. What I'm telling you is that, at least in my experience, mutual funds are treated very differently than exchange traded securities (ETFs/stocks), in a margin account. I don't know if it's law or just industry best practices, but in my experience you can not buy mutual funds on margin. You might be able to margin the mutual funds after holding them with 100% cash after 30 days, but I'm not sure brokers can or will allow you to open a position in a mutual fund using any margin at all.

I'm not saying this is THE reason, but think about what would happen should someone be a bit in over their head when the market tanks on them at 10am. There's no way to sell a mutual fund at 10am to bring an account into compliance with the margin requirements.

I would say forget about VTSAX, there's really no valid reason to prefer it over the ETF, VTI.
ChrisBenn
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Re: Interactive Brokers (Best Kept Secret)

Post by ChrisBenn »

Steve Reading wrote: Thu Sep 17, 2020 6:16 pm (...) I use margin to buy index ETFs like VTI and SPY.
Whats the strategy behind buying SPY (as opposed to any of the lower ER index ETF's)? I get it for derivatives re: liquidity, but am curious why one would hold it directly.
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Steve Reading
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Re: Interactive Brokers (Best Kept Secret)

Post by Steve Reading »

ChrisBenn wrote: Thu Sep 17, 2020 9:34 pm
Steve Reading wrote: Thu Sep 17, 2020 6:16 pm (...) I use margin to buy index ETFs like VTI and SPY.
Whats the strategy behind buying SPY (as opposed to any of the lower ER index ETF's)? I get it for derivatives re: liquidity, but am curious why one would hold it directly.
I don't personally buy SPY. My sentence was meant to be an example of the kinds of ETFs I do buy. The point being that I buy ETFs with liquid option chains on margin.
My sentence is ambiguous, apologies.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
Neus
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Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

Anyone else having issue with IB right now?

I check at phone my stock balance is all gone, check via website, also gone

In their website there's this maintanance, so i'm trying to calm down

Due to scheduled system maintenance, clients will be unable to connect through our web, mobile, and TWS platforms.

[Mesg Id: 333] 2020/09/26 00:16
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
Tanelorn
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Re: Interactive Brokers (Best Kept Secret)

Post by Tanelorn »

Neus wrote: Sat Sep 26, 2020 5:09 am Anyone else having issue with IB right now?

I check at phone my stock balance is all gone, check via website, also gone

In their website there's this maintanance, so i'm trying to calm down

Due to scheduled system maintenance, clients will be unable to connect through our web, mobile, and TWS platforms.

[Mesg Id: 333] 2020/09/26 00:16
Yes, don’t worry about it. Very late hours at night, and especially over the weekend, sometimes have glitches like this.
FoolMeOnce
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Re: Interactive Brokers (Best Kept Secret)

Post by FoolMeOnce »

If you are looking for good margin rates, you can always try asking at you broker before moving to IB. TD Ameritrade has a published rate of something like 8%, but I asked earlier this summer and they approved me at 2%. Ended up not needing it (was preparing for a temporary large cash purchase).
hilink73
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Re: Interactive Brokers (Best Kept Secret)

Post by hilink73 »

Neus wrote: Sat Sep 26, 2020 5:09 am Anyone else having issue with IB right now?

I check at phone my stock balance is all gone, check via website, also gone

In their website there's this maintanance, so i'm trying to calm down

Due to scheduled system maintenance, clients will be unable to connect through our web, mobile, and TWS platforms.

[Mesg Id: 333] 2020/09/26 00:16
They normally do have system maintenance every Saturday morning (European time), where you cannot login.
Looking at the mobile app now (afternoon), it looks strange indeed: I only see my cash balance left. Equities are at 0 market value.

Edit (after a quick search on their website): they are aware of missing account infos: https://www.interactivebrokers.eu/en/index.php?f=2225
Neus
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Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

Thanks for the confirmation

Anyway.. Makes me wonder.. What happen if IB got hacked and our money is gone?
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
rchmx1
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

My positions/share numbers are showing correctly, there's just no market value etc. I'm sure it will be back to normal soon.
Tanelorn
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Re: Interactive Brokers (Best Kept Secret)

Post by Tanelorn »

It’s fixed now.
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Re: Interactive Brokers (Best Kept Secret)

Post by whodidntante »

FoolMeOnce wrote: Sat Sep 26, 2020 7:02 am If you are looking for good margin rates, you can always try asking at you broker before moving to IB. TD Ameritrade has a published rate of something like 8%, but I asked earlier this summer and they approved me at 2%. Ended up not needing it (was preparing for a temporary large cash purchase).
Pretty good deal.
bling
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Re: Interactive Brokers (Best Kept Secret)

Post by bling »

i've been learning/researching a lot on leverage recently and stumbled upon this:

https://etfdb.com/2010/ten-shocking-etf ... ash-crash/

pretty scary...these are not some random ETFs. VTI and IVV are in the list!

yes, this was 10 years ago, yes all of these ETFs are way more liquid today... but if i understand it correctly, if one of these freak events happens again, there's no margin call. IBKR will insta-liquidate and you'll lose everything. is that right?
Chuck
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Re: Interactive Brokers (Best Kept Secret)

Post by Chuck »

corp_sharecropper wrote: Thu Sep 17, 2020 3:09 pm Margin is great for potential and responsible use as a low interest line of credit for a purchase (I mean withdrawing money to buy something outside of the investment world), for shorting individual stocks if that's the sort of "trader" you are, or being opportunistic about buying a individual stocks that don't have a liquid option chain. However, it really doesn't make sense at all if your investment plans revolve around popular/liquid individual stocks or index ETF's if they have a liquid option chain or equity index futures available.
I will admit that I was curious about this one day, and I sold a deep out-of-the-money put spread on SPX. Lo and behold I received $49,250 in my account. Two years later, my position expired, and I paid $50,000. I put the money in a CD or something, so I think I mostly broke even on it. SPX is a European-style option (cash settled, no exercise prior to expiration).

I figured that was a fine way to borrow money if I ever needed to. I received a 1099-B that said something like +$300,000 on one contract, and -$300,750 on the other, so I took a capital loss.

Mathematically, you should be able to sell box spreads for close to the risk-free rate, but depending on the bid/ask spread, you might not be able to get there. I think I was bonking around trial orders for a few hours before I met someone on the other side.
Tanelorn
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Re: Interactive Brokers (Best Kept Secret)

Post by Tanelorn »

bling wrote: Mon Sep 28, 2020 3:47 pm i've been learning/researching a lot on leverage recently and stumbled upon this:

https://etfdb.com/2010/ten-shocking-etf ... ash-crash/

pretty scary...these are not some random ETFs. VTI and IVV are in the list!

yes, this was 10 years ago, yes all of these ETFs are way more liquid today... but if i understand it correctly, if one of these freak events happens again, there's no margin call. IBKR will insta-liquidate and you'll lose everything. is that right?
You’re right to think this way if you’re going to consider margin. Here’s an old discussion on the 2010 flash crash, particularly with regard to ETFs. Liquidity is a funny thing - looks great now, but often is sorely lacking when you need it in times of stress. I don’t recall hearing about IB liquidations during that day, but there very well could have been some.

That said, if you weren’t too leveraged, the stocks would have to have fallen a lot before you’d hit your margin limit and IB might start trying to liquidate positions. I say “trying” because when the spreads are very wide, they often won’t let you cross them even if you want to (“for your own protection”) and I suspect fheir liquidation algo might have similar constraints. In addition, most of the lower trades that day, say -50% or lower (going from memory), got busted by the exchanges the next day anyway so those sales would have been reversed and by that time, the prices were back and so you wouldn’t be in a call. You might lose a little if they sold some more liquid holdings that dipped a bit and subsequently recovered, and it could be a headache, but I don’t think in that particular case it would have been a disaster.
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Re: Interactive Brokers (Best Kept Secret)

Post by AlohaJoe »

bling wrote: Mon Sep 28, 2020 3:47 pm i've been learning/researching a lot on leverage recently and stumbled upon this:

https://etfdb.com/2010/ten-shocking-etf ... ash-crash/

pretty scary...these are not some random ETFs. VTI and IVV are in the list!

yes, this was 10 years ago, yes all of these ETFs are way more liquid today... but if i understand it correctly, if one of these freak events happens again, there's no margin call. IBKR will insta-liquidate and you'll lose everything. is that right?
After the Flash Crash of 2010 the SEC implemented a Limit Up-Limited Down Mechanism for individual securities to prevent future flash crashes. In 2015 there was another flash crash and the mechanism worked more or less as intended. That's why there is no chart from 2015 showing ETFs losing 99% for a few minutes as they did in 2010.

In any case, I have my suspicions (but no actual evidence) that IBKR isn't quite that aggressive about liquidating during flash crashes. If they did that, you'd expect to find hundreds of threads on elitetrader.com from 2010 with people complaining about being liquidated in May 2010. But I can't recall ever seeing a single post about it.
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Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

Anyone else have problem with IB key?

The initial key and generate response take forever with endless processing sign :(
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

Neus wrote: Wed Sep 30, 2020 10:30 am Anyone else have problem with IB key?

The initial key and generate response take forever with endless processing sign :(
Do you mean the security code they send so you can log into your account? Just tried and it pops up in quick as always for me.
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Raraculus
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Re: Interactive Brokers (Best Kept Secret)

Post by Raraculus »

There is a SMA (Special Memorandum Account) dollar figure. What does it mean?

Let's say the SMA is $1,000 for my account. Does it mean I can purchase more securities up to $1,000? Alternatively, it means I could cut a check for up to $1,000?

Thanks.
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Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

rchmx1 wrote: Wed Sep 30, 2020 10:33 am
Neus wrote: Wed Sep 30, 2020 10:30 am Anyone else have problem with IB key?

The initial key and generate response take forever with endless processing sign :(
Do you mean the security code they send so you can log into your account? Just tried and it pops up in quick as always for me.
Yes, it's pops up on me immediately but after clicking, the verification process takes forever
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
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Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

So i just learn about this feature:

Configure Your Stock Yield Enhancement Program

Interactive Brokers Stock Yield Enhancement Program helps you generate extra income and may increase total returns. Program pariticipants receive 50% of the interest income earned by lending your fully held securities to other traders. The interest rate we charge borrowers is transparent, can sell your shares at any time without any restriction and may terminate your participation at any time for any reason.

https://www.interactivebrokers.com/en/index.php?f=46942

Is it a good idea to do this?
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

Neus wrote: Wed Sep 30, 2020 7:42 pm
rchmx1 wrote: Wed Sep 30, 2020 10:33 am Do you mean the security code they send so you can log into your account? Just tried and it pops up in quick as always for me.
Yes, it's pops up on me immediately but after clicking, the verification process takes forever
Weird, I've never had that problem. If you have an adblocker extension running in your browser, you could try disabling it for the IBKR site. Sometimes that can cause problems.
Neus wrote: Wed Sep 30, 2020 7:54 pm So i just learn about this feature:

Configure Your Stock Yield Enhancement Program

Interactive Brokers Stock Yield Enhancement Program helps you generate extra income and may increase total returns. Program pariticipants receive 50% of the interest income earned by lending your fully held securities to other traders. The interest rate we charge borrowers is transparent, can sell your shares at any time without any restriction and may terminate your participation at any time for any reason.

https://www.interactivebrokers.com/en/index.php?f=46942

Is it a good idea to do this?
There's no reason not to, but don't expect much if anything. Previous posters have said that, even with very large portfolios, these kinds of programs generate very little returns. But I'd activate the program, since there's no downside.
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Maple
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Re: Interactive Brokers (Best Kept Secret)

Post by Maple »

Neus wrote: Wed Sep 30, 2020 7:54 pm So i just learn about this feature:

Configure Your Stock Yield Enhancement Program

Interactive Brokers Stock Yield Enhancement Program helps you generate extra income and may increase total returns. Program pariticipants receive 50% of the interest income earned by lending your fully held securities to other traders. The interest rate we charge borrowers is transparent, can sell your shares at any time without any restriction and may terminate your participation at any time for any reason.

https://www.interactivebrokers.com/en/index.php?f=46942

Is it a good idea to do this?
I enrolled in this program. The risks seem very low relative to the potential returns (IB holds cash collateral equivalent to, or slightly more than, the value of shares loaned). Although, in my experience, the returns are low to modest and inconsistent. During high market volatility, demand for borrowing shares (to short them) can be large. During stable market conditions, demand may be low.

Overall, the program provides a low to modest bonus income.
Carol88888
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Re: Interactive Brokers (Best Kept Secret)

Post by Carol88888 »

Just remember: They reserve to make changes about their margin requirements whenever....

I think it is really easy to get in over your head with leverage.
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Re: Interactive Brokers (Best Kept Secret)

Post by occambogle »

Neus wrote: Wed Sep 30, 2020 7:54 pm Is it a good idea to do this?
Have a read of this thread, probably the most recent about SYEP. In summary, I think it's worthwhile to provide small additional income with no downside, but don't expect the amounts to be large.
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Steve Reading
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Re: Interactive Brokers (Best Kept Secret)

Post by Steve Reading »

Neus wrote: Wed Sep 30, 2020 10:30 am Anyone else have problem with IB key?

The initial key and generate response take forever with endless processing sign :(
That has happened to me some times in the past. It's rare but it happens.
Raraculus wrote: Wed Sep 30, 2020 1:22 pm There is a SMA (Special Memorandum Account) dollar figure. What does it mean?

Let's say the SMA is $1,000 for my account. Does it mean I can purchase more securities up to $1,000? Alternatively, it means I could cut a check for up to $1,000?

Thanks.
It's an account to keep track of your borrowing potential given changes in security pricings. As long as the SMA > 0, you are in Reg T compliance. The SMA is reduced dollar-for-dollar by withdrawing cash (so you could cut a check of $1,000). It is reduced by the Reg T initial margin of any stock purchases. This is generally 50% so you could buy up to $2,000 worth of ETFs in the above example.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

Oh wow! I actually earned a bit of money via IBKR's security lending program. Wasn't really expecting that considering I have a pretty modest balance, most of which is in NTSX. Tiny in dollar figures, but still cool to see it work in action.
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Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

https://www.bloomberg.com/news/articles ... f=r9jr5kud

Title: Robinhood Users Say Accounts Were Looted, No One to Call
Brokerage says systems not breached, criminals targeted emails
The SEC has reached out to customers in response to complaints

Makes me wondering, how save is IB?
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
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Re: Interactive Brokers (Best Kept Secret)

Post by bubbasour »

Neus wrote: Sat Oct 10, 2020 2:24 am https://www.bloomberg.com/news/articles ... f=r9jr5kud

Title: Robinhood Users Say Accounts Were Looted, No One to Call
Brokerage says systems not breached, criminals targeted emails
The SEC has reached out to customers in response to complaints

Makes me wondering, how save is IB?
I cannot speak to how much IB customer service would be able to save us should things go south :| However, it's also a good reminder to all of us to enable Two-factor authentication and make sure to add several layers of security so that even if a credential leaks the rouge user cannot log in.
Would also love to hear if anyone can share on IB security of their systems
NRA, Prefer VUAA/VUSD (VOO) and VWRD (VT), No capital gain tax.
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Re: Interactive Brokers (Best Kept Secret)

Post by bling »

bubbasour wrote: Sat Oct 10, 2020 5:34 am
Neus wrote: Sat Oct 10, 2020 2:24 am https://www.bloomberg.com/news/articles ... f=r9jr5kud

Title: Robinhood Users Say Accounts Were Looted, No One to Call
Brokerage says systems not breached, criminals targeted emails
The SEC has reached out to customers in response to complaints

Makes me wondering, how save is IB?
I cannot speak to how much IB customer service would be able to save us should things go south :| However, it's also a good reminder to all of us to enable Two-factor authentication and make sure to add several layers of security so that even if a credential leaks the rouge user cannot log in.
Would also love to hear if anyone can share on IB security of their systems
i enable 2FA on every account i have, but i wish there was an option for IBKR to only ask for new devices because it's incredibly annoying to require 2FA on every single login.
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Re: Interactive Brokers (Best Kept Secret)

Post by xerxes101 »

If hypothetically let's say there was someone who was interested in opening an IBKR account, but this someone wanted to take advantage of a bonus offer on the table which is $1000 worth of IBKR stock if you open a brokerage account...can anyone suggest how would they go about doing this without imposing on the friends on this board (imposing on their privacy)... :D seriously! I hear that offer is good only if an existing IBKR client recommends the person as a new client!

All creative ideas will be considered and appreciated :beer
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Re: Interactive Brokers (Best Kept Secret)

Post by whodidntante »

xerxes101 wrote: Tue Oct 13, 2020 6:18 am If hypothetically let's say there was someone who was interested in opening an IBKR account, but this someone wanted to take advantage of a bonus offer on the table which is $1000 worth of IBKR stock if you open a brokerage account...can anyone suggest how would they go about doing this without imposing on the friends on this board (imposing on their privacy)... :D seriously! I hear that offer is good only if an existing IBKR client recommends the person as a new client!

All creative ideas will be considered and appreciated :beer
Several people got referred through posters on doctorofcredit. Also, ask your friends and coworkers. Post something on the office bulletin board. Try nextdoor. You can't remain anonymous either, just so you know.
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Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

bling wrote: Sat Oct 10, 2020 8:24 am
bubbasour wrote: Sat Oct 10, 2020 5:34 am
Neus wrote: Sat Oct 10, 2020 2:24 am https://www.bloomberg.com/news/articles ... f=r9jr5kud

Title: Robinhood Users Say Accounts Were Looted, No One to Call
Brokerage says systems not breached, criminals targeted emails
The SEC has reached out to customers in response to complaints

Makes me wondering, how save is IB?
I cannot speak to how much IB customer service would be able to save us should things go south :| However, it's also a good reminder to all of us to enable Two-factor authentication and make sure to add several layers of security so that even if a credential leaks the rouge user cannot log in.
Would also love to hear if anyone can share on IB security of their systems
i enable 2FA on every account i have, but i wish there was an option for IBKR to only ask for new devices because it's incredibly annoying to require 2FA on every single login.
do u activate IP restriction which only certain IP can access account management?
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
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Re: Interactive Brokers (Best Kept Secret)

Post by bling »

the pricing structure between tiered vs fixed is very confusing...

i would expect fixed to be cheaper on small amounts, and then tiered gets cheaper with more volume. however, looking at the numbers it appears that even for small accounts tiered is cheaper. this sounds counter intuitive....what am i missing? which pricing structure is better for the typical BH who invests once or twice a month with the extra money after expenses?
vbrbnd
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Re: Interactive Brokers (Best Kept Secret)

Post by vbrbnd »

bling wrote: Thu Oct 22, 2020 9:51 pm the pricing structure between tiered vs fixed is very confusing...

i would expect fixed to be cheaper on small amounts, and then tiered gets cheaper with more volume. however, looking at the numbers it appears that even for small accounts tiered is cheaper. this sounds counter intuitive....what am i missing? which pricing structure is better for the typical BH who invests once or twice a month with the extra money after expenses?
Check the Exchange Fees on the Tiered pricing page (https://interactivebrokers.com/en/index ... &p=stocks2)

On the examples page (https://interactivebrokers.com/en/index.php?f=713&nhf=T) at the bottom they have an example where the fixed pricing structure is cheaper than tiered due to the exchange fees on the tiered pricing ($1368.56 tiered vs. $1028.05 fixed). Exchange fees can vary based on routing, whether your order is marketable or not, etc.
bling
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Re: Interactive Brokers (Best Kept Secret)

Post by bling »

vbrbnd wrote: Thu Oct 22, 2020 10:16 pm
bling wrote: Thu Oct 22, 2020 9:51 pm the pricing structure between tiered vs fixed is very confusing...

i would expect fixed to be cheaper on small amounts, and then tiered gets cheaper with more volume. however, looking at the numbers it appears that even for small accounts tiered is cheaper. this sounds counter intuitive....what am i missing? which pricing structure is better for the typical BH who invests once or twice a month with the extra money after expenses?
Check the Exchange Fees on the Tiered pricing page (https://interactivebrokers.com/en/index ... &p=stocks2)

On the examples page (https://interactivebrokers.com/en/index.php?f=713&nhf=T) at the bottom they have an example where the fixed pricing structure is cheaper than tiered due to the exchange fees on the tiered pricing ($1368.56 tiered vs. $1028.05 fixed). Exchange fees can vary based on routing, whether your order is marketable or not, etc.
i found that example but it's not particularly useful for me because i'm not buying/selling 30 million shares.
Learningandliving
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Re: Interactive Brokers (Best Kept Secret)

Post by Learningandliving »

I spent about an hour trying to understand the benefit of using margin to acquire non investment assets, but don’t follow the tax advantage of using the margin rather than conventional loan.

If I have a big purchase say $100k car and $800k of margin at my disposal what would the tax value be of margin vs conventional loan or cash?
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Re: Interactive Brokers (Best Kept Secret)

Post by whodidntante »

Learningandliving wrote: Thu Oct 22, 2020 11:11 pm I spent about an hour trying to understand the benefit of using margin to acquire non investment assets, but don’t follow the tax advantage of using the margin rather than conventional loan.

If I have a big purchase say $100k car and $800k of margin at my disposal what would the tax value be of margin vs conventional loan or cash?
I think the best way to understand potential tax benefits is not to read a bunch of stuff or ask, but to do a mock tax return. For example, take last year's return, and assume you paid $1,000 in margin interest. Did you get a deduction and did you save as much as you expected to? You've already spent more time reading than you would have used to do a mock tax return (I think).
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