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

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

Post by calwatch »

Fxmove88 wrote: Fri Nov 19, 2021 4:45 am
adamhg wrote: Thu Nov 18, 2021 9:49 pm
Fxmove88 wrote: Thu Nov 18, 2021 7:32 pm
Your box trades website did not capture all the transactions as specified in your maturity dates . These past few days I sold boxes for 4 accounts and none were captured by your system.
Thanks for the data point. Sounds like it was for one of the tenors that shows up in at the bottom? And I assume you didn't leg out of it?

I've suspected that my brokerage isn't sending me all trades I'm subscribed to, so that might be the reason, but four is a lot to miss. I'll keep trying to find a better source in the mean time
I sold four Dec 16, 2022 boxes on Nov. 17. It was straight short of boxes instead of using call & put spreads
I also sold a box, December 16, 2022 4000-4300 for 297.75 on November 18, 2021 which didn't show up on the chart. I think it may be a great indicator of rates and relative volume, but may not be perfect in capturing every trade out there.
calwatch
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by calwatch »

One issue with the wide spreads is that when the market is volatile, your paper value may vary widely from the actual worth. For example, my four boxes with a total value of $140,000 lost about $15,000 in paper value today. For those who are not used to this it can be somewhat unsettling. It doesn't look like my maintenance margin changed much, though. I'm on Ameritrade so there is no risk of auto liquidation so score one point for using them.
Fxmove88
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

calwatch wrote: Fri Nov 26, 2021 9:38 pm One issue with the wide spreads is that when the market is volatile, your paper value may vary widely from the actual worth. For example, my four boxes with a total value of $140,000 lost about $15,000 in paper value today. For those who are not used to this it can be somewhat unsettling. It doesn't look like my maintenance margin changed much, though. I'm on Ameritrade so there is no risk of auto liquidation so score one point for using them.
all of my boxes and also my clients' are oke yesterday as we use portfolio margin. Some are deep in the money showing positive gain. Did you not set portfolio margin mode in Ameritrade?
calwatch
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by calwatch »

I am on portfolio margin so my total buying power was similar. But the paper loss is there. I've already posted my trades in the thread so this isn't sharing additional information that hasn't already been posted.

Image
Fxmove88
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

My 4 SPX boxes of $300k declined only by a total of $443.72 as of 26 Nov 2021.
Selling a box in an increasing interest rate environment is all right. It becomes risky only when interest rate declines (like yesterday).
TD Ameritrade probably treat box as a collection of options, unlike IBKR which clearly treats differently between call spreads/put spreads combo vs a box. Perhaps you should consider moving your account to IBKR? :)
Image
Fxmove88
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

Just to show the difference in margin requirements of a box constructed from Bull Call Spread and Bear Put Spread vs Box Spread.
Box Spread definitely requires a lot less margin in IBKR.
Image and Image

Vs

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

Post by richardm »

FWIW, I sold a small box on TD Ameritrade a few weeks back. Took account balance screenshots before and after execution. At the time I was NOT using margin and had some settled cash in the account.

Selling the box essentially traded buying power for cash on a 1:1 basis. The tiny box sale added to my available cash and presumably I can do whatever I want with it.

I do not have portfolio margin on this account. Only standard margin.
sharukh
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

Hi,

Shall we discuss on tax reporting mechanics as well ?
How to report, what forms to fill, will HR lock and TurboTax deluxe download handle these, holding for more than 1 year vs less than 1 year, capital loss carryover or deductions against other capital gains, etc

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

Post by sharukh »

sharukh wrote: Sun Nov 28, 2021 8:15 am Hi,

Shall we discuss on tax reporting mechanics as well ?
How to report, what forms to fill, will HR lock and TurboTax deluxe download handle these, holding for more than 1 year vs less than 1 year, capital loss carryover or deductions against other capital gains, etc

Thank you.
I found the answer:
https://support.tastyworks.com/support/ ... x-options-
https://support.tastyworks.com/support/ ... -software-
calwatch
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by calwatch »

sharukh wrote: Sun Nov 28, 2021 8:15 am Hi,

Shall we discuss on tax reporting mechanics as well ?
How to report, what forms to fill, will HR lock and TurboTax deluxe download handle these, holding for more than 1 year vs less than 1 year, capital loss carryover or deductions against other capital gains, etc

Thank you.
On IBKR you would get a Section 1256 contract summary on the 1099's at the end of the year. I assume the same is the case with other brokers. You mark to market your gains or losses, and do not report individual transactions. In my case, if the conditions hold, I would have $15,000 in paper losses to apply to other gains that year, applied 60/40 between short and long term losses.
sharukh
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

PSA: Watch out for pin risk for those who choose let the options expire instead of closing it by buying back the box.

https://www.youtube.com/watch?v=7ma1mXXFLGA
DMoogle
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by DMoogle »

adamhg wrote: Fri Oct 22, 2021 4:22 pm I took a few days to put a website together so I didn't need to post every week. In case anybody else is interested, you can find my historical box spread data here: www.boxtrades.com

Welcome feedback for any changes or improvements
Just wanted to thank you again for putting this together. I have an open box spread order, and I'm pricing it based on the rates here.
nalor511
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by nalor511 »

DMoogle wrote: Mon Nov 29, 2021 8:09 pm
adamhg wrote: Fri Oct 22, 2021 4:22 pm I took a few days to put a website together so I didn't need to post every week. In case anybody else is interested, you can find my historical box spread data here: www.boxtrades.com

Welcome feedback for any changes or improvements
Just wanted to thank you again for putting this together. I have an open box spread order, and I'm pricing it based on the rates here.
I better not, it would temp me to buy more ETFs than I have money for :)
stay_the_course
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by stay_the_course »

sharukh wrote: Mon Nov 29, 2021 7:52 pm PSA: Watch out for pin risk for those who choose let the options expire instead of closing it by buying back the box.

https://www.youtube.com/watch?v=7ma1mXXFLGA
I may be wrong but isn't this only a risk with non cash settled American options? SPX options are cash settled at expiry.
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outofthebox
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by outofthebox »

Fxmove88 wrote: Sat Nov 27, 2021 9:36 am Just to show the difference in margin requirements of a box constructed from Bull Call Spread and Bear Put Spread vs Box Spread.
Box Spread definitely requires a lot less margin in IBKR.
Seems like SPX boxes need a lot less initial and maintenance margin than for example an ESTX50 box?
sharukh
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

Fxmove88 wrote: Sat Nov 27, 2021 9:36 am Just to show the difference in margin requirements of a box constructed from Bull Call Spread and Bear Put Spread vs Box Spread.
Box Spread definitely requires a lot less margin in IBKR.
Image and Image

Vs

Image
Hi Fxmove88,
Can you show where in the IB mobile app to add another leg to the order manually ?

I was able to generate the order using strategy builder, but
The strategy builder is not showing far away options(both in time and money)

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

Post by sharukh »

adamhg wrote: Fri Oct 22, 2021 4:22 pm I took a few days to put a website together so I didn't need to post every week. In case anybody else is interested, you can find my historical box spread data here: www.boxtrades.com

Welcome feedback for any changes or improvements
Hi adamhg,
This website is amazing. Someday I wish to be as skilled enough to build a website like this. May be you can add https://www.buymeacoffee.com/ button there.

The APY on the website is not matching with what is generated by spreadsheet.
https://docs.google.com/spreadsheets/d/ ... sp=sharing

11/26 - 10:23 - 15 Dec 22 trade for 20k loan
credit 199.5
rate 0.24


Spreadsheet says: Loan APY: 0.253%

Similarly the difference is even large for the Dec 23


May be Rate from the Website mean something else then APY.

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

Post by sharukh »

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

Image

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

Image

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

Does Fidelity gives portfolio margin ?

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

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

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

Post by millennialmillions »

Hi all, I have a leveraged 140% equity 140% ITT portfolio as per this thread. For the taxable portion, I am currently using portfolio margin at IBKR and have a -$220k cash balance at 1.08% interest. I am reading and learning how to do a box spread to lower the interest rate and lock into a longer time period.

One concern is this post in the EliteTraders thread that says: "It's crucial that you sell the box, then buy the securities you want to effectively margin, not the other way around as it won't work unless you have the cash from the box sale in your account first."

I don't think this is accurate. Selling the box spread will immediately give me cash, increasing my cash balance. For example, if I sold box spreads for a total of $200k, I would then have just a -$20k balance at IBKR's 1.08% interest, with $200k at the rate implied by the box cost.

Am I correct that this is how it works and that poster was off?
DMoogle
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by DMoogle »

millennialmillions wrote: Tue Nov 30, 2021 12:07 pm Hi all, I have a leveraged 140% equity 140% ITT portfolio as per this thread. For the taxable portion, I am currently using portfolio margin at IBKR and have a -$220k cash balance at 1.08% interest. I am reading and learning how to do a box spread to lower the interest rate and lock into a longer time period.

One concern is this post in the EliteTraders thread that says: "It's crucial that you sell the box, then buy the securities you want to effectively margin, not the other way around as it won't work unless you have the cash from the box sale in your account first."

I don't think this is accurate. Selling the box spread will immediately give me cash, increasing my cash balance. For example, if I sold box spreads for a total of $200k, I would then have just a -$20k balance at IBKR's 1.08% interest, with $200k at the rate implied by the box cost.

Am I correct that this is how it works and that poster was off?
You are correct, I dunno what that poster was talking about. I was/am in the same boat as you - used margin for a while, then switched to boxes. I rebalanced the other day and bought an extra $85k or so in equities and had a -$85k cash balance, and am trying to get a box filled to bring that cash balance back to $0.

EDIT: I posted a screenshot of what the transaction should look like for a box on IBKR mobile here, you can use for reference: viewtopic.php?p=6223760#p6223760

Note that using a limit order is CRUCIAL, so you can set the rate (otherwise you'll get SCREWED), and don't expect it to fill immediately. Set a reasonable rate, and if it hasn't filled in a few hours or day, increase the rate a little.
nalor511
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by nalor511 »

DMoogle wrote: Tue Nov 30, 2021 12:19 pm
millennialmillions wrote: Tue Nov 30, 2021 12:07 pm Hi all, I have a leveraged 140% equity 140% ITT portfolio as per this thread. For the taxable portion, I am currently using portfolio margin at IBKR and have a -$220k cash balance at 1.08% interest. I am reading and learning how to do a box spread to lower the interest rate and lock into a longer time period.

One concern is this post in the EliteTraders thread that says: "It's crucial that you sell the box, then buy the securities you want to effectively margin, not the other way around as it won't work unless you have the cash from the box sale in your account first."

I don't think this is accurate. Selling the box spread will immediately give me cash, increasing my cash balance. For example, if I sold box spreads for a total of $200k, I would then have just a -$20k balance at IBKR's 1.08% interest, with $200k at the rate implied by the box cost.

Am I correct that this is how it works and that poster was off?
You are correct, I dunno what that poster was talking about. I was/am in the same boat as you - used margin for a while, then switched to boxes. I rebalanced the other day and bought an extra $85k or so in equities and had a -$85k cash balance, and am trying to get a box filled to bring that cash balance back to $0.

EDIT: I posted a screenshot of what the transaction should look like for a box on IBKR mobile here, you can use for reference: viewtopic.php?p=6223760#p6223760

Note that using a limit order is CRUCIAL, so you can set the rate (otherwise you'll get SCREWED), and don't expect it to fill immediately. Set a reasonable rate, and if it hasn't filled in a few hours or day, increase the rate a little.
How are you calculating the "rate" you mention? Fidelity screenshotted example from this thread is fine if you want to use that one to show an example calculation, and how moving the numbers changes the rate. Thanks so much
DMoogle
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by DMoogle »

nalor511 wrote: Tue Nov 30, 2021 12:43 pmHow are you calculating the "rate" you mention? Fidelity screenshotted example from this thread is fine if you want to use that one to show an example calculation, and how moving the numbers changes the rate. Thanks so much
Rate = (([Spread amount] / [Limit price]) - 1) / [Time to Expiry (years)]
E.g. If the box uses 4875 and 4000 strikes, then the spread is 875. Expiration of 12/14/2023 is 2.038 years away from today. If I price at 861, then (875/861)-1 / 2.038 = 0.798% annual interest rate.

There's a spreadsheet here you can use, and I use whenever I set up new boxes: https://www.lesswrong.com/posts/8NSKMMD ... tly-faster. I used that as a base and made some minor adjustments (e.g. look at rate on a yearly basis rather than daily).
Freebee34
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Freebee34 »

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

Image

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

Image

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

Does Fidelity gives portfolio margin ?

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

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

Thank you.
I have portfolio margin with fidelity. The process is a bit obtuse but you end up in the right spot. I think min equity goes down to 25% vs 15% for interactive brokers.
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

DMoogle wrote: Tue Nov 30, 2021 12:52 pm
nalor511 wrote: Tue Nov 30, 2021 12:43 pmHow are you calculating the "rate" you mention? Fidelity screenshotted example from this thread is fine if you want to use that one to show an example calculation, and how moving the numbers changes the rate. Thanks so much
Rate = (([Spread amount] / [Limit price]) - 1) / [Time to Expiry (years)]
E.g. If the box uses 4875 and 4000 strikes, then the spread is 875. Expiration of 12/14/2023 is 2.038 years away from today. If I price at 861, then (875/861)-1 / 2.038 = 0.798% annual interest rate.

There's a spreadsheet here you can use, and I use whenever I set up new boxes: https://www.lesswrong.com/posts/8NSKMMD ... tly-faster. I used that as a base and made some minor adjustments (e.g. look at rate on a yearly basis rather than daily).
Can you please remind me of the rationale why yearly and not daily? If we want to compare funding rates, some alternative funding rates compound monthly (IB margin credit) or every 3 months (futures), right?

Also, shouldn't it be ((875 / 861)) ^ (1 / 2.038) - 1 instead of ((875 / 861) - 1) / 2.038 ? Otherwise you are compounding every 2+ years?
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

Fxmove88 wrote: Sat Nov 27, 2021 9:36 am Just to show the difference in margin requirements of a box constructed from Bull Call Spread and Bear Put Spread vs Box Spread.
Box Spread definitely requires a lot less margin in IBKR.
Image and Image

Vs

Image
I think we had that conversation before, but I think we didn't get a resolution yet. Your screenshots are margin previews of specific watchlist items, right? We still don't know if IB combines the spreads after trading both bull and bear spreads into a box, for purpose of margin calculation under portfolio margin, even if they don't show it as a box in TWS or the mobile up. Have you ever tested this? Either with before/after screenshots of the Account window with the margin requirements, or maybe the margin simulator, or with a paper account.
adamhg
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by adamhg »

sharukh wrote: Tue Nov 30, 2021 5:43 am
Hi adamhg,
This website is amazing. Someday I wish to be as skilled enough to build a website like this. May be you can add https://www.buymeacoffee.com/ button there.

The APY on the website is not matching with what is generated by spreadsheet.
https://docs.google.com/spreadsheets/d/ ... sp=sharing

11/26 - 10:23 - 15 Dec 22 trade for 20k loan
credit 199.5
rate 0.24


Spreadsheet says: Loan APY: 0.253%

Similarly the difference is even large for the Dec 23


May be Rate from the Website mean something else then APY.

Thank you.
My pleasure! The rate formula is the effectively same DMoogle posted above, but you can also find it on the OCC site as well if you're looking for a slightly more authoritative reference (no offence DMoogle! ;)):

https://www.optionseducation.org/refere ... -cash.aspx

The lesswrong spreadsheet I think adds a few differences that have already been called out (daily compounding) but also commissions. They added $0.65 * 4 for each leg, which may or may not match up with your broker.
comeinvest wrote: Tue Nov 30, 2021 8:23 pm Can you please remind me of the rationale why yearly and not daily? If we want to compare funding rates, some alternative funding rates compound monthly (IB margin credit) or every 3 months (futures), right?

Also, shouldn't it be ((875 / 861)) ^ (1 / 2.038) - 1 instead of ((875 / 861) - 1) / 2.038 ? Otherwise you are compounding every 2+ years?
I believe this is the "coupon equivalent rate" of a zero coupon bond: https://www.investopedia.com/terms/c/co ... ntrate.asp
Coupon equivalent rate (CER) allows an investor to compare a zero-coupon bond to a coupon-paying one
DMoogle
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by DMoogle »

comeinvest wrote: Tue Nov 30, 2021 8:23 pmCan you please remind me of the rationale why yearly and not daily? If we want to compare funding rates, some alternative funding rates compound monthly (IB margin credit) or every 3 months (futures), right?

Also, shouldn't it be ((875 / 861)) ^ (1 / 2.038) - 1 instead of ((875 / 861) - 1) / 2.038 ? Otherwise you are compounding every 2+ years?
Eh, kind of splitting hairs at this point given how low the rate is. The difference is negligible. I tried to keep it simple. :)
adamhg wrote: Tue Nov 30, 2021 8:41 pmThe lesswrong spreadsheet I think adds a few differences that have already been called out (daily compounding) but also commissions. They added $0.65 * 4 for each leg, which may or may not match up with your broker.
Yeah I removed that for sake of simplicity in my example above. In practice, I think IBKR charges $1.50/leg, so $6 per box.
sharukh
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

Hi,

Just came across some wording about some risk, I didn't understand enough, just sharing it incase if it is applicable.

To insure the adequacy of its financial resources, OCC has a liquidity margin call policy in place that can cause OCC to require a clear-
ing member to maintain a certain amount of cash margin deposits when their aggregated liquidity demand exceeds certain thresh-
olds. The policy begins 30 days prior to expiration, and has specific thresholds at both the 30 day and 5 day horizon. To avoid the
policy thresholds market participants may wish to look at using non-quarterly expiries as the basis for option boxes.
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millennialmillions
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by millennialmillions »

DMoogle wrote: Tue Nov 30, 2021 12:19 pm EDIT: I posted a screenshot of what the transaction should look like for a box on IBKR mobile here, you can use for reference: viewtopic.php?p=6223760#p6223760
Thanks DMoogle, your posts in this thread have been super helpful. I am going to sell my first box, starting small to ensure I have it right.

If this fills it would result in borrowing $9,950 at a rate of (4600-4500)/99.5 * 365/380 = 0.48%, which would be just slightly below the EMA line on boxtrades.com. Does this look right?

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

Post by sharukh »

millennialmillions wrote: Tue Nov 30, 2021 10:33 pm
DMoogle wrote: Tue Nov 30, 2021 12:19 pm EDIT: I posted a screenshot of what the transaction should look like for a box on IBKR mobile here, you can use for reference: viewtopic.php?p=6223760#p6223760
Thanks DMoogle, your posts in this thread have been super helpful. I am going to sell my first box, starting small to ensure I have it right.

If this fills it would result in borrowing $9,950 at a rate of (4600-4500)/99.5 * 365/380 = 0.48%, which would be just slightly below the EMA line on boxtrades.com. Does this look right?

Image
Looks right to me.
comeinvest
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

adamhg wrote: Tue Nov 30, 2021 8:41 pm
comeinvest wrote: Tue Nov 30, 2021 8:23 pm Can you please remind me of the rationale why yearly and not daily? If we want to compare funding rates, some alternative funding rates compound monthly (IB margin credit) or every 3 months (futures), right?

Also, shouldn't it be ((875 / 861)) ^ (1 / 2.038) - 1 instead of ((875 / 861) - 1) / 2.038 ? Otherwise you are compounding every 2+ years?
I believe this is the "coupon equivalent rate" of a zero coupon bond: https://www.investopedia.com/terms/c/co ... ntrate.asp
Coupon equivalent rate (CER) allows an investor to compare a zero-coupon bond to a coupon-paying one
Probably off topic, but... I get the definition of CER, but I have trouble comprehending how it makes bonds comparable. A zero coupon bond that doubles in 10 years has a CER of 10%. But you would prefer a 10% coupon bond that matures in 10 years any time of the day, because it has an IRR of 10%, while the zero coupon bond has an IRR of 7.2%, or not?
Naively, I would say it makes 2 bonds comparable if and only if the coupon-bearing bond pays its coupon(s) at time of maturity only.
DMoogle
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by DMoogle »

millennialmillions wrote: Tue Nov 30, 2021 10:33 pm
DMoogle wrote: Tue Nov 30, 2021 12:19 pm EDIT: I posted a screenshot of what the transaction should look like for a box on IBKR mobile here, you can use for reference: viewtopic.php?p=6223760#p6223760
Thanks DMoogle, your posts in this thread have been super helpful. I am going to sell my first box, starting small to ensure I have it right.

If this fills it would result in borrowing $9,950 at a rate of (4600-4500)/99.5 * 365/380 = 0.48%, which would be just slightly below the EMA line on boxtrades.com. Does this look right?
The setup looks correct. Since you're doing a smaller box with a shorter expiration time, the commission makes more of a difference. You can check out the spreadsheet I mentioned more for details, but when I plug your numbers into mine, the commission ends up adding about 0.06%, for a total of an effective 0.54% interest rate.

That said, since it's decently below the EMA, there's a good chance it won't get filled anyway... at least not immediately. Be patient. Keep the order open (set it to Good till Cancel instead of Day) for a day, and if it hasn't filled, increase the rate (i.e. decrease the price). For reference, I have an open order for a box for the past two days, and I'm currently offering an effective 0.83% rate (however, mine is set for Dec. 2023, which makes a substantial difference).
Fxmove88
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

comeinvest wrote: Tue Nov 30, 2021 8:30 pm

I think we had that conversation before, but I think we didn't get a resolution yet. Your screenshots are margin previews of specific watchlist items, right? We still don't know if IB combines the spreads after trading both bull and bear spreads into a box, for purpose of margin calculation under portfolio margin, even if they don't show it as a box in TWS or the mobile up. Have you ever tested this? Either with before/after screenshots of the Account window with the margin requirements, or maybe the margin simulator, or with a paper account.
No, IB does not combine them into a box. Both are treated separately and stay separate combos in your portfolio and also for margin calculations, though the final effect of cash are credited like shorting a box.
Last edited by Fxmove88 on Wed Dec 01, 2021 1:22 pm, edited 1 time in total.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

sharukh wrote: Tue Nov 30, 2021 5:37 am
Hi Fxmove88,
Can you show where in the IB mobile app to add another leg to the order manually ?

I was able to generate the order using strategy builder, but
The strategy builder is not showing far away options(both in time and money)

Thank you.
First add SPX to watchlist and then click and choose SPX, then click options. Activate strategy builder at the bottom right corner. Choose expiry and click on the desired size of the box; as shown by red and blue numbers for SPX Box of 4500-4600 for USD10K loan/deposit which will expire on Dec 15, 2022.

Image

add this to your watchlist and it will be shown as

Image
Last edited by Fxmove88 on Wed Dec 01, 2021 2:08 pm, edited 9 times in total.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

sharukh wrote: Mon Nov 29, 2021 7:52 pm PSA: Watch out for pin risk for those who choose let the options expire instead of closing it by buying back the box.

https://www.youtube.com/watch?v=7ma1mXXFLGA
It does not apply to Index options boxes which are cash settled only at a maturity.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

millennialmillions wrote: Tue Nov 30, 2021 10:33 pm
DMoogle wrote: Tue Nov 30, 2021 12:19 pm EDIT: I posted a screenshot of what the transaction should look like for a box on IBKR mobile here, you can use for reference: viewtopic.php?p=6223760#p6223760
Thanks DMoogle, your posts in this thread have been super helpful. I am going to sell my first box, starting small to ensure I have it right.

If this fills it would result in borrowing $9,950 at a rate of (4600-4500)/99.5 * 365/380 = 0.48%, which would be just slightly below the EMA line on boxtrades.com. Does this look right?

Image
This is just the reverse of the common practice and you would BUY such a box to get a loan.
You will notice that the quotations of Bid and Ask are negative numbers. It could be confusing to what we usually discuss in this forum. i.e. usually we try to get as much credit as possible to get a lower interest rate (i.e. higher selling number when selling the box).

But then it all depends on the perspective. If you have been getting the loan correctly then it's fine too. To me, a quote of negative number is confusing.
Last edited by Fxmove88 on Thu Dec 02, 2021 2:56 am, edited 2 times in total.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

Fxmove88 wrote: Wed Dec 01, 2021 1:14 pm
sharukh wrote: Tue Nov 30, 2021 5:37 am
Hi Fxmove88,
Can you show where in the IB mobile app to add another leg to the order manually ?

I was able to generate the order using strategy builder, but
The strategy builder is not showing far away options(both in time and money)

Thank you.
First add SPX to watchlist and then click and choose SPX, then click options. Activate strategy builder at the bottom right corner. Choose expiry and click on the desired size of the box; as shown by red and blue numbers for SPX Box of 4500-4600 for USD10K loan/deposit which will expire on Dec 15, 2022.

Image

add this to your watchlist and it will be shown as

Image
Thank you so much for taking time for this. The problem I faced was those strikes were not showing up. I have to use the 3 dots on top and set the needed strikes and expiration date then I was able to see them in strategy builder.
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millennialmillions
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by millennialmillions »

I gradually stepped the price to $99.20 (interest rate of 0.78% ignoring commission) but still didn't get it filled today. A few got filled below that rate but were much larger. Since this is my first one for just $10k to get the mechanics down, I'll probably lower the price further to get it filled tomorrow. Will need to be more patient on my next one, which will be bigger.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

IB mobile app dont give the option to set "Liquidate last" on the box. It has to be done in TWS only.

Even though mobile app has easy to use interface, lacks this one important feature in this case.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by Fxmove88 »

millennialmillions wrote: Wed Dec 01, 2021 7:36 pm I gradually stepped the price to $99.20 (interest rate of 0.78% ignoring commission) but still didn't get it filled today. A few got filled below that rate but were much larger. Since this is my first one for just $10k to get the mechanics down, I'll probably lower the price further to get it filled tomorrow. Will need to be more patient on my next one, which will be bigger.
You gradually changed your buying price from Minus $99.50 to Minus $99.20 ? see how difficult it is to think when buying something with negative numbers.
Conversely, it is much easier to think of selling the box initially at $99.50 reduces the selling price slowly to $99.20 to get it filled.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by millennialmillions »

Fxmove88 wrote: Thu Dec 02, 2021 4:24 am You gradually changed your buying price from Minus $99.50 to Minus $99.20 ? see how difficult it is to think when buying something with negative numbers.
Conversely, it is much easier to think of selling the box initially at $99.50 reduces the selling price slowly to $99.20 to get it filled.
Yep, always a credit (otherwise it definitely would have filled!).
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by DMoogle »

Is there a way to see open Box orders on the market? I feel like there has to be...

Btw currently offering 0.89% on my Dec 2023 Box, still not filled (been slowly increasing rate since Monday).
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by millennialmillions »

Was able to get my $10k reverse box at 99.10, rate of 0.88% ignoring commission. Filled immediately when I went from 99.20 to 99.10 this morning. Now to move onto bigger money - I'm looking for another $200k. Thoughts on whether I could get a better rate with a single box with a 2000 spread or 2 boxes with a 1000 spread? Seems there is not much volume with spreads that large, but there are several with spreads around 1000 and multiple boxes. So I'm leaning toward 2 boxes with a 1000 spread.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by sharukh »

millennialmillions wrote: Thu Dec 02, 2021 8:20 am
Fxmove88 wrote: Thu Dec 02, 2021 4:24 am You gradually changed your buying price from Minus $99.50 to Minus $99.20 ? see how difficult it is to think when buying something with negative numbers.
Conversely, it is much easier to think of selling the box initially at $99.50 reduces the selling price slowly to $99.20 to get it filled.
Yep, always a credit (otherwise it definitely would have filled!).
Schwab blocks a trade if the value is a debit for these kind of trades. So we don't shoot ourselves.
+1 for Schwab.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by DMoogle »

millennialmillions wrote: Thu Dec 02, 2021 10:21 am Was able to get my $10k reverse box at 99.10, rate of 0.88% ignoring commission. Filled immediately when I went from 99.20 to 99.10 this morning. Now to move onto bigger money - I'm looking for another $200k. Thoughts on whether I could get a better rate with a single box with a 2000 spread or 2 boxes with a 1000 spread? Seems there is not much volume with spreads that large, but there are several with spreads around 1000 and multiple boxes. So I'm leaning toward 2 boxes with a 1000 spread.
There was some discussion about this in the past. I personally don't think it'll make a difference, other than less boxes = less commission you have to pay.

Could run some analytics based on the raw data, if adamhg could share.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by comeinvest »

DMoogle wrote: Thu Dec 02, 2021 3:20 pm
millennialmillions wrote: Thu Dec 02, 2021 10:21 am Was able to get my $10k reverse box at 99.10, rate of 0.88% ignoring commission. Filled immediately when I went from 99.20 to 99.10 this morning. Now to move onto bigger money - I'm looking for another $200k. Thoughts on whether I could get a better rate with a single box with a 2000 spread or 2 boxes with a 1000 spread? Seems there is not much volume with spreads that large, but there are several with spreads around 1000 and multiple boxes. So I'm leaning toward 2 boxes with a 1000 spread.
There was some discussion about this in the past. I personally don't think it'll make a difference, other than less boxes = less commission you have to pay.

Could run some analytics based on the raw data, if adamhg could share.
What was the maturity of that 0.88% box?
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millennialmillions
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by millennialmillions »

comeinvest wrote: Thu Dec 02, 2021 4:11 pm What was the maturity of that 0.88% box?
December 2022. Selected that so I could at least get lower than my current IBKR rate of 1.08%. I know locking into something like 1% until December 2023 might be a better move...I just can't bring myself to pay more interest now and assume I'll save from IBKR's rates going up in the future.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by klaus14 »

IBKR margin requirement for these are listed as "cost to close" (source)
is that based on expiry or current ask? if the latter, it can create problems when not liquid.

do you see margin requirement fluctuating or constant? in other words, can it be more than 100% of the loan amount ?
My investment algorithm: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=351899&p=6112869#p6112869
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by adamhg »

comeinvest wrote: Wed Nov 03, 2021 11:43 pm
adamhg wrote: Wed Nov 03, 2021 9:11 pm
tananaev wrote: Wed Nov 03, 2021 7:44 pm I'm also having hard time getting fills. Could be that market rates are going higher because of upcoming fed tapering. Or could be just too many people found out about this trick and that's pushing prices higher.

When you say "current treasury rate", do you look at the 2 year or 3 year treasury? I'm selling Dec 23 options. I'm assuming 2 years, right?
Lowest somebody got today for Dec 23 was 0.9% ($981 for $1000 wide legs) so that could be a good place to start or just under there
But with your method of identifying box spreads, you never know if the retail investor SOLD or BOUGHT the spread, do you? My understanding is that in the options market, at least for multi-legged options spreads, opposing client orders are rarely matched, but dealers compete for incoming client orders, and the dealers' bots are programmed to required some spread. One time when I bought one of my boxes back, there was a ca. 0.1% difference in rates (ca. 0.45% vs. 0.55%) when I bought it back vs. the rate that I paid. What I'm saying is, we cannot expect to get a rate similar to a rate from the trades history, as long as we don't know on which side the retail investor vs. the dealer was, can we?
This has been bugging me until I realized that I'm actually storing off the current bid/ask for each leg of the box spread at the time the trade is made. So in an attempt to determine which side of the trade the market market is on, I thought maybe we could check whether each leg is closer to the bid or ask and aggregate it into an indicator.

Here's my initial attempt for the Dec 22 and 23 expirys which have the most data points:

Image
Image

You can kind of see the pattern. The blue (retail investor possibly BOUGHT the spread) is generally under the EMA line whereas the purple (mid point/unknown or retail investor possibly SOLD the spread) is all over the place.

I've read a number of papers that present methods to do this for individual trades, but does this work for spreads as well? Would publishing this change be overall helpful or add too much noise to the chart?

I also took the opportunity to filter out data points that were 2 sigma higher or lower than all previous points. So that should also clean up the charts a bit more. Thanks @parval for calling that issue out
Last edited by adamhg on Fri Dec 03, 2021 2:54 pm, edited 3 times in total.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021

Post by adamhg »

DMoogle wrote: Thu Dec 02, 2021 3:20 pm
millennialmillions wrote: Thu Dec 02, 2021 10:21 am Was able to get my $10k reverse box at 99.10, rate of 0.88% ignoring commission. Filled immediately when I went from 99.20 to 99.10 this morning. Now to move onto bigger money - I'm looking for another $200k. Thoughts on whether I could get a better rate with a single box with a 2000 spread or 2 boxes with a 1000 spread? Seems there is not much volume with spreads that large, but there are several with spreads around 1000 and multiple boxes. So I'm leaning toward 2 boxes with a 1000 spread.
There was some discussion about this in the past. I personally don't think it'll make a difference, other than less boxes = less commission you have to pay.

Could run some analytics based on the raw data, if adamhg could share.
The size of the bubbles indicate the spread. I was hoping to use that as a visual indicator to see if "larger" boxes got preferential rates but its not obvious from visual inspection.

If you'd like to try your own analysis, you can access the raw data through the API call (same one the website uses): https://api.boxtrades.com/api/boxspreads

If you're not comfortable with json, you should be able to load it into Excel as a data source. Please don't abuse the API :)
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