what are you selling today?

[John Hjorth]

@Luke,

 

Are you trying to tell us that you have been margin called by IB?

[UK]

1 hour ago, Luke said:

I am reducing some of my margin positions because IB doesn't like it that I have large positions in FFH, PRX and PDD

 

Is this the same situation since MW attack in Winter or is it something recent/new? Maybe that is the thing driving FFH price down:)

[Junior R]

doesn't IB auto liquidate? 

[Luke]

IB auto liquidates yes, I have no margin call at all and was not at risk with 70%+ net liquidity but my margin requirements are sky-high because they hate my concentration in PDD, FFH, and Prosus. I wrote with them and even with a tiny margin of 5%, I have like 35% of my portfolio as maintenance margin because of the concentration which kind of sucks. I am only selling things that are in the green, slowly reducing it with the cash coming in every month. Not saying something bad will happen but if there is some big macro event I might really get a margin call like that which id like to prevent. 

 

I am relatively new to portfolio margin and am gaining some experience with it, its a good tool, if understood well and used appropriately. 

Edited August 7 by Luke

[Luke]

Portfolio margin requirements are REALLY opaque though and IB can change it at any time, as we saw with Mr. Muddy Waters...IB doing him a favor!!!!!

[Gregmal]

12 minutes ago, Luke said:

Portfolio margin requirements are REALLY opaque though and IB can change it at any time, as we saw with Mr. Muddy Waters...IB doing him a favor!!!!!

Yea IB is awful with this. Generally though it’s based on market cap, sector and historical volatility. 

[Luke]

2 minutes ago, Gregmal said:

Yea IB is awful with this. Generally though it’s based on market cap, sector and historical volatility. 

Yeah and if MW comes out with short report they massively increase your margin requirements for no reason  

[Luke]

I wish I could be like Buffett and have debt options like taking on long-term yen debt etc. Sucks to be a retail investor...

[Lollapalooza]

1 hour ago, Luke said:

I wish I could be like Buffett and have debt options like taking on long-term yen debt etc. Sucks to be a retail investor...

Funny. Pretty sure he sees those odds in reverse. Retail investors are way nimblers and have the world at their disposal - he just has a couple of elephants

[UK]

16 hours ago, Luke said:

Yeah and if MW comes out with short report they massively increase your margin requirements for no reason  

 

I think their reason was as simple as that i.e. MW attack and this is were their analysis ends. But I am curious if these requirements still are the same as in February or there were recent changes? Or why would you run into this situation now again?

 

If IB changes its margin rules so arbitrary, maybe it is safer to use some leverage via options instead of margin (not in FFH case though) then?

 

Edited August 8 by UK

[nwoodman]

Sold minor positions  plus Apple and Markel to eliminate margin in one account.  Rotated Apple into Berkshire in the other. 

[Luke]

7 hours ago, UK said:

 

I think their reason was as simple as that i.e. MW attack and this is were their analysis ends. But I am curious if these requirements still are the same as in February or there were recent changes? Or why would you run into this situation now again?

 

If IB changes its margin rules so arbitrary, maybe it is safer to use some leverage via options instead of margin (not in FFH case thoigh) then?

 

I was reducing my margin but requirements didn't go down, so I contacted them, and it's a problem due to my entire portfolio composition. Have to think about it if I want to continue with my positions like this, either reduce margin or take more risk or just get out of margin completely as long as I hold 3 concentrated positions. 

[nwoodman]

27 minutes ago, Luke said:

I was reducing my margin but requirements didn't go down, so I contacted them, and it's a problem due to my entire portfolio composition. Have to think about it if I want to continue with my positions like this, either reduce margin or take more risk or just get out of margin completely as long as I hold 3 concentrated positions. 

Feel for you, these brokers are goal-post-moving pricks.  Possibly not a bad thing if you are new to margin though.  Might be helpful to frame margin in the context of if this is happening to you, then what are the ramifications across the board for those that are carrying margin but are not so value orientated.  Their actions and leverage feed into the machine and will affect you no matter what the IV of your investments are.

[Luke]

45 minutes ago, nwoodman said:

Feel for you, these brokers are goal-post-moving pricks.  Possibly not a bad thing if you are new to margin though.  Might be helpful to frame margin in the context of if this is happening to you, then what are the ramifications across the board for those that are carrying margin but are not so value orientated.  Their actions and leverage feed into the machine and will affect you no matter what the IV of your investments are.

Well said.

[thepupil]

17 hours ago, Luke said:

IB auto liquidates yes, I have no margin call at all and was not at risk with 70%+ net liquidity but my margin requirements are sky-high because they hate my concentration in PDD, FFH, and Prosus. I wrote with them and even with a tiny margin of 5%, I have like 35% of my portfolio as maintenance margin because of the concentration which kind of sucks. I am only selling things that are in the green, slowly reducing it with the cash coming in every month. Not saying something bad will happen but if there is some big macro event I might really get a margin call like that which id like to prevent. 

 

I am relatively new to portfolio margin and am gaining some experience with it, its a good tool, if understood well and used appropriately. 

35% isn’t that bad, I have no margin borrowed at this time and my maintainance margin is 40%. This is an aggregate of 3 100% margin positions that trade OTC and the rest being ~20%. Largest position is 15% and account owns 12 stocks. Ideally I should put the 100%ers in IRA’s, but don’t use enough mgn anymore for it to matter.

[UK]

I am not sure I understood situation correctly then or understand it today, but what IB did back in February, they basically said, that if you own concentrated position in FFH, then the whole top 3 concentrated positions is eliminated from margin calculation, which is kind of interesting, especially if you own only a few positions in an account: 

 

"The aggregate projected loss of the top three concentrated stocks (and their derivatives) will be compared to what would otherwise be the aggregate portfolio margin requirement, and the greater of the two will be the margin requirement for the portfolio."

 

So great margin rates by IB, but not so great / strange margin requirements and especially penalising if you own big position in FFH? I have no idea why this makes sense, since at the same time they would let you margin favourably some shitty smallcap in the other side of the world, yet not FFH, but perhaps this is done automatically according to some of their rules (attacked by shortsellers=no margin?).

[Luke]

20 minutes ago, thepupil said:

35% isn’t that bad, I have no margin borrowed at this time and my maintainance margin is 40%. This is an aggregate of 3 100% margin positions that trade OTC and the rest being ~20%. Largest position is 15% and account owns 12 stocks. Ideally I should put the 100%ers in IRA’s, but don’t use enough mgn anymore for it to matter.

35% maintenance margin of the entire acc worth? That's pretty bad IMO. Having an ACC value of 800k and borrowing 80k means you need to maintain 250k worth of shares for 80k of borrowed money. And then they will probably increase that further during volatility so you have to pledge 300k for 80k on which you pay full interest. Just bad IMO. 

11 minutes ago, UK said:

I am not sure I understood situation correctly then or understand it today, but what IB did back in February, they basically said, that if you own concentrated position in FFH, then the whole top 3 concentrated positions is eliminated from margin calculation, which is kind of interesting, especially if you own only a few positions in an account: 

Yeah, there is a new calculation where the concentrated positions loss counts to the margin requirements. Essentially you need to diversify to 20 stocks at 5% each to fall back under relatively normal requirements and I am unable to find 20 good ideas that are worth sacrificing my concentration in order to take up margin. 

11 minutes ago, UK said:

"The aggregate projected loss of the top three concentrated stocks (and their derivatives) will be compared to what would otherwise be the aggregate portfolio margin requirement, and the greater of the two will be the margin requirement for the portfolio."

yeah...

11 minutes ago, UK said:

So great margin rates by IB, but not so great / strange margin requirements and especially penalising if you own big position in FFH? I have no idea why this makes sense, since at the same time they would let you margin favourably some shitty smallcap in the other side of the world, yet not FFH, but perhaps this is done automatically according to some of their rules (attacked by shortsellers=no margin?).

They have a margin team that looks at individual accounts as far as I know and they don't like FFH as a stock, especially not since MW came out with the short. PDD and PRX are self explanatory xD 

 

 

[Luke]

But for someone who owns lets say 30 quality stocks, easy to take up 10-20% of margin to buy some 10 PE stocks in japan or so and let margin do its thing. But not with concentration, prem and china  

[thepupil]

1 hour ago, Luke said:

35% maintenance margin of the entire acc worth? That's pretty bad IMO. Having an ACC value of 800k and borrowing 80k means you need to maintain 250k worth of shares for 80k of borrowed money. And then they will probably increase that further during volatility so you have to pledge 300k for 80k on which you pay full interest. Just bad IMO. 

 

 

No, my excess liquidity is ~60% of my account. I could take out half my equity (and be 200% long) and still have a little breathing room. I would obviously not do this, but I definitely don't need to maintain the amount of margin you think. I mean really it's just that I have about 25% of my account in non-marginable securities. This makes sense as those are illiquid and trade OTC. they should be fully paid. I think IBKR is quite generous with margin, particularly portfolio margin. 

 

I recently had a 70% position in EQC in this same account, all of which borrowed. Hedging with options made the margin requirement equivalent to the non-put protected amount. I've taken a >100% position in PSTH in this account (once again protected with puts) to get a bunch of SPARC'ies one day.

 

Just buy some 30% OTM puts on your stuff and watch the required margin collapes

 

Test out what your margin does if you buy some January 2026 $90 PDD puts for $7 (5% of the current stock price)

 

EDIT: FWIW i don't even see PDD as a high maint margin security. It's 20% for me. 

Edited August 8 by thepupil

[rogermunibond]

@Spekulatius @Saluki  what do you make of Corvex taking a big stake in VSTS?  

 

Are they able to stem the loss of accounts to Cintas?  Interesting that VSTS appointed a new Sales VP who comes from Cintas.

[throw123]

SBUX, ALLY, WFC

[Saluki]

18 hours ago, rogermunibond said:

@Spekulatius @Saluki  what do you make of Corvex taking a big stake in VSTS?  

 

Are they able to stem the loss of accounts to Cintas?  Interesting that VSTS appointed a new Sales VP who comes from Cintas.

 

I try to stay away from the commoditized low-margin businesses. What can an activist do for a business like that?  Load it up with debt to buy back shares? Spin off non-core holdings? Trim the fat in an already low margin business? There are easier ways to make money. 

[Eng12345]

some C 

[Spekulatius]

8 hours ago, Saluki said:

 

I try to stay away from the commoditized low-margin businesses. What can an activist do for a business like that?  Load it up with debt to buy back shares? Spin off non-core holdings? Trim the fat in an already low margin business? There are easier ways to make money. 

This is not a commoditized low margin business. Yes, the service is some what commoditized but there are only 3 or for large players and there are differences in offering, local focus etc.. I still have not seen where any employer of mine that has changed their supplier for clean room suits in more than 20 years. Just not worth it since the pricing does not different all that much ( from what I have heard).

 

I have not idea about account losses from VSTS but I think to get large account losses, they really have to screw up big time. I sold because the leverage is high and the growth seems to be lacking and going close to zero and it just seems one of those cases where the spinoff goes through teething issues which can take a while to iron out. I have seen this too many times. I think there was just too much pressure to make the numbers which lead to suboptimal decision making.

[Spekulatius]

Sold remaining DOCS position. Worked out really well.

Edited August 21 by Spekulatius