Moving to cash only to remove margin limitations was my best decision this month.
Yes, I would have been much happier with SP 1150 instead of 910 but still sleeping much better and my Mylanta intake has decreased.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Road to Recovery - How to Slow and Steady Restore a Blown-Up Account (and Be the House Again)
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if one
- has $100,000 capital
- has no stocks (or has stocks but not using the margin/leverage)
- is only selling weekly options (5 DTE)
- is getting only $1 premium on 100-wide spreads (2/4 -p680/+p580, 20% OTM, 6 delta, Prob OTM 93%)
- has no other positions (no second income for the week)
- is BTC weekly at 80% (don't milk it to death and chance an SP reversal)
- is using only 95% of cash ($5k is reserve)
- is compounding the profits (no acct withdrawals)
- is not adding new capital (no new deposits)
- is trading 52 weeks
then
- the $100k capital will grow by $45,600 in year 1 (ROR 45%)
- wrapping the BPS into an IC on Thursday (0-1 DTE) will give gravy income
assume
- 52 wins and no loss; (of course, in real world one will have the occasional loss but less likely at 20% OTM 5 DTE)
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if one
- has $100,000 capital
- has no stocks (or has stocks but not using the margin/leverage)
- is only selling weekly options (5 DTE)
- is getting only $1 premium on 100-wide spreads (2/4 -p680/+p580, 20% OTM, 6 delta, Prob OTM 93%)
- has no other positions (no second income for the week)
- is BTC weekly at 80% (don't milk it to death and chance an SP reversal)
- is using only 95% of cash ($5k is reserve)
- is compounding the profits (no acct withdrawals)
- is not adding new capital (no new deposits)
- is trading 52 weeks
then
- the $100k capital will grow by $45,600 in year 1 (ROR 45%)
- wrapping the BPS into an IC on Thursday (0-1 DTE) will give gravy income
assume
- 52 wins and no loss; (of course, in real world one will have the occasional loss but less likely at 20% OTM 5 DTE)
While I want to believe that, I am now burned and more willing to listen to a possibility this account is talking about,
It’s been dead on on the recent events and even most of the timing, wondering if it’s the same as tivoboy on TMC, projections are very close:
I did not believe it. It happened. The next thing this account is talking about is Nasdaq 11000 in March. So, I will try to exercise more caution. That’s why I moved all my spreads way out.
And btw, I don’t believe Putin will invade Ukraine. Just listened to a bunch of YouTube videos, U.S. has supplied tons of weapons and ammunition to Ukraine that far exceeds what’s amassed at its borders - 100k troops, 1500 tanks, 3000 armored personnel carriers. Any capability of Russia’s remote missile strikes from its ships and remote ground sites will be negated by U.S providing intelligence capabilities to Ukraine and sharing data.
Russian stock market is in shambles and international companies are exiting Russia en masse. This response, which is not final, has shown Putin his bluff is called.
He’s looking for a way out to save the face.
I think this blackmailing of the West of his by creating a dumpster fire on the Europe’s border and a flow of refugees is done. He lost.
Russian stock market is in shambles and international companies are exiting Russia en masse. This response, which is not final, has shown Putin his bluff is called.
He’s looking for a way out to save the face.
I think this blackmailing of the West of his by creating a dumpster fire on the Europe’s border and a flow of refugees is done. He lost.
This particular account has been screaming bear market for more than a year now so I guess he finally got it right.
In general I agree that the sentiment is very negative with a lot of mixed signals but be careful. Most of the so called growth stocks are completely beat up and I feel like we should be close to the bottom. Take it week by week I guess would be right approach here.
The pinned tweet from November called Nasdaq max in November. Don’t know what was before.
The rest is based on Fed’s actions, for ex.
The March projection is from the same train of thought.
The last couple of weeks when we thought we could not go any lower every single day, he called most days right, whether up or down. Which may speak to his reasoning being better than mine.
Not a source of indisputable truth for sure, but being nearly destroyed this week (luckiIy, didn’t get exercised with those 100% ITM spreads), I want to be a bit safer - lower strikes, more margin in reserve than usual.
I made a mistake here in updating this and cannot edit it, put the wrong expiration in my post. I rolled these puts to 2/18 at 1225 and closed out 2/3 of them with the proceeds. The plan is to roll them back down into additional contracts if we continue to rise. I dont want to be sidelined until 2024. However, if we continue trending downward, I will be forced to roll these out. Mostly this was a margin saving maneuver when we dipped below 800. It will require me to carry an extra contract or two when rise back up, but I have the margin/cash to support that.
Not ideal, but I slept better last night.
LightngMcQueen
Aspirationally Rational
Did you redo the math by hand?
Questrade UI says 50% but when I did the math across all my positions the effective margin requirment came up >62%, which could be explained by caping of margin loan. It somewhat lines up with @Zhelko Dimic experience with TD. I believe minimum concentration rules come down from IIROC and neither IBKR nor Questrade can skirt around them, but they can go higher. Questrade calculator, which shows up during order preview (web), now appears to be giving me wrong answers, which do not line up with margin impact post-execution.
IIROC rules (if someone can understand and explain it to me, I promise from now on to refer to her/him as Stable Genius):
Publications
/**/ As a result of the migration of the content from legacy organizations' websites, some documents have been archived. Please contact CIRO’s web team and we will get back to you about the item you are looking for: Contact the CIRO Web Team.Please include the title or description of the item in...
Both Qt and IBKR have advantages:
I only write PUTs in Questrade because this is the only way that allows me to utilize margin w/o paying inflated interest rates. At IBKR with margin at 1% I feel it is better risk/reward to just use margin to accumulate shares and write off what is in effect -4% real interest rate from income.
Another difference: it takes 1 day to top up account in Questrade through bank bill pay, it takes 2 days to top up IBKR Canada through bill pay: they keep the money on hold for 1 day and it does not add to the liquidity until next day.
TD rules for reference: What are your margin requirements and concentration guidelines?
Last edited:
Zhelko Dimic
Careful bull
TD Direct has ability to wave the concentration rule on individual account.Did you redo the math by hand?
Questrade UI says 50% but when I did the math across all my positions the effective margin requirment came up >62%, which could be explained by caping of margin loan. It somewhat lines up with @Zhelko Dimic experience with TD. I believe minimum concentration rules come down from IIROC and neither IBKR nor Questrade can skirt around them. Questrade calculator, which shows up order preview (web), now appears to be giving me wrong answers, which do not line up with margin impact post-execution.
IIROC rules (if someone can understand and explain it to me, I promise from now on to refer to her/him as Stable Genius):
Publications
/**/ As a result of the migration of the content from legacy organizations' websites, some documents have been archived. Please contact CIRO’s web team and we will get back to you about the item you are looking for: Contact the CIRO Web Team.Please include the title or description of the item in...www.iiroc.ca
Both Qt and IBKR have advantages:
I only write PUTs in Questrade because this is the only way that allows me to utilize margin w/o paying inflated interest rates. At IBKR with margin at 1% I feel it is better risk/reward to just use margin to accumulate shares and write off what is in effect -4% real interest rate from income.
Another difference: it takes 1 day to top up account in Questrade through bank bill pay, it takes 2 days to top up IBKR Canada through bill pay: they keep the money on hold for 1 day and it does not add to the liquidity until next day.
TD rules for reference: What are your margin requirements and concentration guidelines?
I've had it waved in the past, so I doubt it comes directly from IIRC.
My problems with TD Direct actually started when last year they've suddenly reapplied the concentration rule, created a deadline for transition of about a month, and then failed to issue any warning or a curtesy call.
Until the day before the deadline.
No information, nothing. And they wouldn't budge and move the date.
Basically the Risk department doesn't care if other departments screw up, they blindly do their job.
LightngMcQueen
Aspirationally Rational
Good point, if you are an accredited investor then, I believe, different risk rules apply.
When it happened when the rules were waived did you qualify for Accredited Investor status? Maybe they (person or a nightly batch) removed it. TD is like an icebreaker. It is solid but good luck getting any nuance out of them.
After a brutal month, I am realizing this (80% OTM, 5 DTE, $100 wide spreads, close at 80%) for $1 may be the only safe way for me to trade options.
Yoona - One question I have, is how many contracts of these 80% OTM/$100 wide spreads would you do with a $100K in your account-would you do 10x and use all your available margin each week?
What about $500K, or $1M account, just scale the number of contracts up accordingly ?
I believe @Yoona calculated a 5% reserve, so with 100K, you are using 95k as backing, so 95 $100 wide contracts. X5 or x10 for 500k or 1 million. Correct me if I am wrong!
Zhelko Dimic
Careful bull
I thought Accredited Investor was a US thing.
I am in a "President's Club", and definitely have enough funds under management to qualify for US Accredited Investor, but not ever asked, offered or mentioned as a part of solution. And I've had lots and lots of hours talking to folks at TD Direct.
Zhelko Dimic
Careful bull
Ok, found it. It seems to be more lax than in US and I definitely qualify, and TD knows it:
It is the obligation of the issuer to ensure that they can rely on a prospectus exemption, and that the purchaser meets the definition of “accredited investor”. There is no formal process to register as an accredited investor, but you should be prepared to provide documentation that proves you meet the income and financial asset requirements.
SebastienBonny
Member
See attachments: she starts with 9 contracts (680-580 = 100, 100 * 100 * 9 = 90K).
At the end of the year 13 contracts/week.
My questions: why not half the spread (680-630) and double the number of contracts (= more credit/week).
When to roll? I know, pretty exceptional when staying 20% otm 5 days before expiry.
LightngMcQueen
Aspirationally Rational
I would assume/hope that they would not flag you as accredited investor automatically, unless you ask for it.
BTW I personally value my privacy and believe that asking for Accredited investor status or even concentrating holdings in one institution is like jogging on savannah in front of hyenas. The will mark you as 'high value target'.
Proof: I do not know how it is possible but the personal data of HNW families is for sale and I suspect leakage originates in Wealth Mgt industry:
"At the core of each of our products and services are detailed profiles on high net worth (HNW), very high net worth (VHNW) and ultra high net worth (UHNW) individuals"
Maybe you can buy API access for a month and check if you are there with expired record ... that would explain sudden onset margin problems
Interesting. I have calculated it a few times previously and it seemed to be 50%. I’ll check next week to see what it’s doing now. Have to admit the lack of transparency on a lot of these calculations is quite annoying.Did you redo the math by hand?
Questrade UI says 50% but when I did the math across all my positions the effective margin requirment came up >62%, which could be explained by caping of margin loan. It somewhat lines up with @Zhelko Dimic experience with TD. I believe minimum concentration rules come down from IIROC and neither IBKR nor Questrade can skirt around them, but they can go higher. Questrade calculator, which shows up during order preview (web), now appears to be giving me wrong answers, which do not line up with margin impact post-execution.
IIROC rules (if someone can understand and explain it to me, I promise from now on to refer to her/him as Stable Genius):
Publications
/**/ As a result of the migration of the content from legacy organizations' websites, some documents have been archived. Please contact CIRO’s web team and we will get back to you about the item you are looking for: Contact the CIRO Web Team.Please include the title or description of the item in...
Both Qt and IBKR have advantages:
I only write PUTs in Questrade because this is the only way that allows me to utilize margin w/o paying inflated interest rates. At IBKR with margin at 1% I feel it is better risk/reward to just use margin to accumulate shares and write off what is in effect -4% real interest rate from income.
Another difference: it takes 1 day to top up account in Questrade through bank bill pay, it takes 2 days to top up IBKR Canada through bill pay: they keep the money on hold for 1 day and it does not add to the liquidity until next day.
TD rules for reference: What are your margin requirements and concentration guidelines?
LightngMcQueen
Aspirationally Rational
Yes it is annoying and frankly quite dangerous as my margin call this week has proved.
But I do believe that together on this board we have enough data to come up with some models that are reasonable approximations for both Questrade and IBKR. I will redo my Questrade numbers.
I can tell that for IBKR Canada it is also relative concentration not only absolute amount (like in TD) that counts - I've noticed even smaller accounts flipping from rule based to risk based margin calculation recently.
For eTrade, the formula I am using isn't 100%, but it does a reasonable job of staying in the ballpark for margin. I dont really ever use more than 50% anyways, so its more than sufficient for my needs. This tells you how much margin is being used:
K30=40% (Broker Margin %)
K80=Share price at option open
H80=Number of contracts
J80=Strike Price of Option
M80=Option Price
= $K$30*(K80*(H80*100))+((J80-K80)*(100*H80))+M80*H80*100
100 wide = 9 contracts
50 wide = 18 contracts and more credit; i thought about this but not recommending it due to black swan... max loss is the same and Prob OTM is the same 93%, but the effort/chance of rescuing this spread is harder (think of the Thurs morning after the conference call or the Hertz morning or the Evergrande morning - massive loss is instant for 50-width because SP drop is too fast and 5 DTE $1 prem is too low)
roll/BTC at 80% (80%+ will give more profits but next week's credit might be lower); my preference is Thursday
for 500k capital, just extrapolate/scale up (ie x5)
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