Why do Portfolio Margin (PM) account margin requirements differ so much? | Reviews of Brokers and Data Feeds


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Why do Portfolio Margin (PM) account margin requirements differ so much?

  #4 (permalink)

The Villages, Fl
 
Trading Experience: Advanced
Platform: TOS
Favorite Futures: SPX, RUT
 
Posts: 3 since Mar 2014
Thanks: 2 given, 8 received

Agree with everything you said


GFIs1 View Post
Lets have a look at it from a economical point of view:

Every broker company sits in the same market - but:
Bigger companies are not looking for short time clients. They are neither looking for
small accounts.
Smaller companies have smaller client base and need to attract future clients by sending
out signals like being the best: better pricing, better margins, better leverage etc.
IB for example needs a large client base with steady growth in client capital - this
is the survival plan. Platform and other things are not that important as the quick
user is not taking profit of the offer - only 10% of the offered tools are really used.
The new companies jumping in offer a big bunch of goodies, easy platform with
only the basics.
Trading market is tough! For brokers as for traders.
Benefitting of longtime security thinking of funds and traders put bigger brokers
in a better position. Maybe some better leverage or smaller margin can attract
for short time traders - the security of investment is for many investors the main thing.

Just my 2 cents
GFIs1

Thank you for your response. Agree with your position. Still, how can one broker's risk model be so different from another? I get your point about large vs small brokers. Yet, both TD Ameritrade and IB are vey substantial and safe firms. The fact that they are so different in their PM requirements only demonstrates that one of them is wrong in their risk analysis. From my perspective, both are incorrect. My broker transaction cost is $.55 at IB and double that at TOS. My buying power at TOS is twice what it is at IB, so I can trade twice the size. My style of trading is virtually non-directional with a slight bias toward the bullish side right now. In other words, my Lambda is structured so that my trades make more when the market rises and lose less when the market falls. Necessarily, I adjust when my other greeks suggest the time is right to do so. In a single trade that may start out as a simple 25 X 22 debit call and 11 X 11 credit call OTM condor, I may add and / or subtract hundreds of contracts to and from either, or both, sides during the life of the trade. Initiating a couple of these a month with expirations out 60 - 150 days, requires a hefty % of potential profits in transaction costs or eats up significant buying power. Although my profitable closed trades are in the 2% to 25% range and fall within 95% RPOP, my maximum loss on every trade is limited to 5% at trade initiation and decreases everyday the trade is alive, I still have huge transaction costs at the end of every trade because of all the required adjustments. I do not sell credit spreads. I am looking for a broker who understands how complex option strategies with proper and effective management can mitigate the trader's, as well as, the broker's risk. So far, I have not found a single one. Just thought through this forum I might connect with an options player who has already blazed this trail.

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