Margin Requirements

| | |

| |

Introduction to Margin

Buying on Margin

Borrowing money to purchase securities is known as " buying on margin". When an investor borrows money from his broker to buy a stock, he must open a margin account with his broker, sign a related agreement and abide by the broker's margin requirements. The loan in the account is collateralized by investor's securities and cash. If the value of the stock drops too much, the investor must deposit more cash in his account, or sell a portion of the stock.

Initial and Maintenance Margin

The Federal Reserve Board and self-regulatory organizations (SROs), such as the New York Stock Exchange and FINRA, have clear rules regarding margin trading. In the United States, the Fed's Regulation T allows investors to borrow up to 50 percent of the price of the securities to be purchased on margin. The percentage of the purchase price of securities that an investor must pay for is called the initial margin. To buy securities on margin, the investor must first deposit enough cash or eligible securities with a broker to meet the initial margin requirement for that purchase.

Once an investor has started buying a stock on margin, the NYSE and FINRA require that a minimum amount of equity be maintained in the investor's margin account. These rules require investors to have at least 25 percent of the total market value of the securities they own in their margin account. This is called the maintenance margin. For market participants identified as pattern day traders, the maintenance margin requirement is $25,000.

When the balance in the margin account falls below the maintenance requirement, the broker can issue a margin call requiring the investor to deposit more cash, or the broker can liquidate the position.

Brokers also set their own minimum margin requirements called "house requirements". Some brokers extend more lenient lending conditions than others and lending terms may also vary from one client to the other but brokers must always operate within the parameters of margin requirements set by regulators.

Not all securities can be bought on margin. Buying on margin is a double-edged sword that can translate into bigger gains or bigger losses. In volatile markets, investors who borrowed from their brokers may need to provide additional cash if the price of a stock drops too much for those who bought on margin or rallies too much for those who shorted a stock. In such cases, brokers are also allowed to liquidate a position, even without informing the investor. Real-time position monitoring is a crucial tool when buying on margin or shorting a stock.

IB Real-Time Margining

Interactive Brokers uses real-time margining to allow you to see your trading risk at any moment of the day. Our real-time margin system applies maintenance margin requirements throughout the day to new trades and trades already on the books and enforces initial margin requirements at the end of the day, with real-time liquidation of positions instead of delayed margin calls. This system allows us to maintain our low commissions because we do not have to spread the cost of credit losses to customers in the form of higher costs.

Our real-time margin system allows you to see your trading risk at any moment of the day using the real-time activity monitoring features in Trader Workstation. For more information about real-time margin monitoring, see the Real-Time Monitoring Margin page.

IB Margin Accounts

We offer our customers two types of margin accounts: Reg T Margin and Portfolio Margin. Requirements for each of these accounts are detailed on the Account Types tab of the Trading Configuration page.

Account Type	Decription	How We Calculate Margin
Reg T Margin	Borrowing to support equities trading, shorting of equities, options trading, futures/futures options trading, currency conversions and securities/commodities trading in multiple currency denominations available. Purchase and sale proceeds are immediately recognized.	Margin requirements are computed in real-time under a rules-based calculation methodology, with immediate position liquidation if the minimum maintenance margin requirement is not met.
Portfolio Margin	Borrowing to support equities trading, shorting of equities, options trading, futures/futures options trading, currency conversions and securities/commodities trading in multiple currency denominations available.	Margin requirements are calculated based on a risk-based calculation methodology. Customers maintain account equity of USD 100,000 in order to use a portfolio margin account. Otherwise account restrictions will apply.

At IB, margin means different things for securities and commodities. For securities, margin is the amount of cash a client borrows from IB. For commodities, margin is the amount of cash a client must put up as collateral to support a futures contract.

Universal Account^SM

Although the Universal Account^SM should be viewed as a single account for trading and account monitoring purposes, for regulatory and segregation purposes, there exists a separate securities and commodities account. If there is a margin deficiency in either your securities or commodities account, cash will be transferred to cover the margin deficiency. At the end of each day, any excess cash in your commodities account will be swept to your securities account, where it is covered by the Securities Investor Protection Corporation (SIPC)

Margin Model

Margin requirements are calculated either on a rules basis and/or a risk basis.

Margin Calculation Basis	Available IB Products
Rule-Based Margin System: Predefined and static calculations are applied to each position or predefined groups of positions (“strategies”).	Reg T accounts: US stocks, index options, stock options, single stock futures, and mutual funds. All accounts: Forex; bonds; Canadian, European, and Asian stocks; and Canadian stock options and index options.
Risk-Based Margin System: Exchanges consider the maximum one day risk on all the positions in a complete portfolio, or subportfolio together (for example, a future and all the options delivering that future).	Portfolio Margin accounts: US stocks, index options, stock options, single stock futures, and mutual funds. All accounts: All futures and future options in any account. Non-US/Non-Canadian stock options and index options in any account.

Margin requirements for each underlying are listed on the appropriate exchange site for the contract. A summary of the requirements for the major futures contracts as well as links to the exchange sites are available on our Futures Margin Requirements page.

The securities segment of a cash account is always rule-based. These rules are:

Long stock has no margin and no loan value.
You cannot short stock.

Extreme Margin Model

Systems that derive risk-based margin requirements deliver adequate assessments of the risk for complex derivative portfolios under small/moderate move scenarios. Such systems are less comprehensive when considering large moves in the price of the underlying stock or future. IB has enhanced the basic exchange margin models with algorithms that consider the portfolio impact of larger moves up 30% (or even higher for extremely volatile stocks). This 'Extreme Margin Model' may increase the margin requirement for portfolios with net short options positions, and is particularly sensitive to short positions in far out-of-the-money options.

Note:

In the interest of ensuring the continued safety of its clients, IB may modify certain margin policies to adjust for unprecedented volatility in financial markets. The changes will promote reduction of leverage in client portfolios and help ensure that clients’ accounts are appropriately capitalized.
IB is focused on prudent, realistic, and forward looking approaches to risk management. In order to provide the broadest notification to our clients, we will post announcements to the IB System Status page. We strongly encourage all clients to monitor this web page for advance alerts regarding margin policy changes.
Note that the credit check for order entry always considers the initial margin of existing positions. Therefore, although an account may be holding an existing position at 35%, for example, it is the initial margin requirement of that position that is used in the credit check calculation for order acceptance.

US Stocks

The following calculations apply only to Reg T Margin and Cash Accounts. See our Portfolio Margin page for US Stock requirements in a Portfolio Margin account.	The NYSE and FINRA have imposed rules to limit small investor day trading. Customers that these organizations classify as Pattern Day Traders are subject to special Day Trading Restrictions for US securities.
The following table shows stock margin requirements for initial (at the time of trade), maintenance (when holding positions), and Overnight Reg T time periods.

Margin Requirements			Cash
IB Initial	IB Maintenance	Reg T End of Day	Cash
Long Position
25% * stock value or $2,000, whichever is greater.	Same as Initial.	50% * stock value or $2,000, whichever is greater.	100% * Stock Value
Short Positions
If last sale price/share >=$5, then $5 per share or (30% * stock value), whichever is greater. If last sale price/share < $5, then $2.50 per share or (100% * stock value), whichever is greater. Short sale proceeds are applied to cash and the short position value is subtracted from equity.	Same as Initial.	50% * stock value or short sale maintenance requirement, whichever is greater. Short sale proceeds are applied to cash and the short position value is subtracted from equity.	N/A
Non-Marginable Long or Short Positions
100% * stock value or $2,000, whichever is greater.	Same as Initial.	100% * stock value or $2,000, whichever is greater.	Only Long Positions: 100% * Stock Value

Notes:

The securities segment of a cash account is always rule-based. These rules are: long stock has no margin and no loan value, and you cannot short stock.
Margin requirements quoted in US dollars may also be satisfied with a Non-US Dollar equivalent.
IRA margin accounts must always pay for securities in full using available equity with loan value.
IB has additional algorithms which increase the nominal margin for positions that represent a >1% holding of an individual company’s shares outstanding, with full margin required for concentrations of >= 5% of a company’s shares outstanding. Investors should be prepared to meet the increased margin, where holdings are above 1% threshold.

US Options

The following calculations apply only to Reg T and Cash Accounts. See our Portfolio Margin page for US Options requirements in a Portfolio Margin account.

FINRA and the NYSE have imposed rules to limit small investor day trading. Customers that these organizations classify as Pattern Day Traders are subject to Day Trading Restrictions for US Securities.

Please note that Interactive Brokers utilizes option margin optimization software to try to create the minimum margin requirement. However, due to the system requirements required to determine the optimal solution, we cannot always guarantee the optimal combination in all cases.

The following table shows option margin requirements for each type of margin combination.

Combination Type	Margin Accounts		Cash Accounts
Combination Type	IB Initial/RegT End of Day	IB Maintenance	Cash Accounts
Long Call or Put
	None. Long option cost is subtracted from cash.	None.	None. Long option cost is subtracted from cash.
Short Naked Call
	100% * option market value + (20% * underlying market value - out of the money amount or 10% * underlying market value, whichever is greater) or $2.50 * multiplier * number of contracts, whichever is greater. 20% above is 15% for broad based index options. Short sale proceeds are applied to cash. Not allowed for IRA accounts. IB has a minimum margin of 2.5 USD per share of the underlying. This minimum does not apply to RegT margin.	Same as Initial.	N/A
Short Naked Put
	100% * option market value + (20% * underlying market value - out of the money amount or 10% * strike price, whichever is greater) or $2.50 * multiplier * number of contracts, whichever is greater. 20% above is 15% for broad based index options. Short sale proceeds are applied to cash. Same rules as cash for IRA Margin Accounts. IB has a minimum margin of 2.5 USD per share of the underlying. This minimum does not apply to RegT margin.	Same as Initial.	100% of the aggregate put strike price.
Covered Calls and Puts
Short an option with an equity position held to cover full exercise upon assignment of the option contract.	Initial stock margin requirement + 100% of in the money option value. Short sale option proceeds are applied to cash. Same rules as cash for IRA Margin Accounts	Stock maintenance margin requirements + 100% of in the money option value.	Covered Calls Stock paid in full. Covered Puts N/A
Call Spread
A long and short position of equal number of calls on the same underlying (and same multiplier) if the long position expires on or after the short position.	Aggregate long call strike - aggregate short call strike or 0, whichever is greater. Long call cost is subtracted from cash and short call proceeds are applied to cash.	Same as Initial.	Aggregate long call strike - aggregate short call strike or 0, whichever is greater. Long call cost is subtracted from cash and short call proceeds are applied to cash. Both options must be European style cash settled.
Put Spread
A long and short position of equal number of puts on the same underlying (and same multiplier) if the long position expires on or after the short position.	Aggregate short put strike - aggregate long put strike or 0, whichever is greater. Long option cost is subtracted from cash and short option proceeds are applied to cash.	Same as Initial.	Aggregate short put strike - aggregate long put strike or 0, whichever is greater. Long option cost is subtracted from cash and short option proceeds are applied to cash. Both options must be European style cash settled.
Collar
Long put and long underlying with short call. Put and call must have same expiration date, same underlying (and same multiplier), and put exercise price must be lower than call exercise price.	Put option cost is subtracted from cash, short option proceeds are applied to cash. Same rules as cash for IRA Margin Accounts. Equity with Loan Value of long stock: Current market value or call aggregate exercise price, whichever is lower.	(10% * put exercise price) + out-of-the-money put amount or 25% * call exercise price, whichever is lower.	Stock paid in full. Long stock and put option cost is subtracted from cash, short option proceeds are applied to cash.
Long Call and Put
Buy a call and a put.	Margined as two long options.	Same as Initial.	Same as Margin Account.
Short Call and Put
Sell a call and a put.	If the greater of short call margin and short put margin = short call margin, then short call margin + put premium else short put margin + call premium. Short option proceeds are applied to cash. Not allowed for IRA accounts.	Same as Initial.	N/A
Long Butterfly
Two short options of the same series (class, multiplier, strike price, expiration) offset by one long option of the same type (put or call) with a higher strike price and one long option of the same type with a lower strike price. All component options must have the same expiration, same underlying, and intervals between exercise prices must be equal.	None. Long option cost is subtracted from cash and short option proceeds are applied to cash.	None.	N/A
Short Butterfly Put
Two long put options of the same series offset by one short put option with a higher strike price and one short put option with a lower strike price. All component options must have the same expiration, same underlying, and intervals between exercise prices must be equal.	Aggregate put option highest exercise price - aggregate put option second highest exercise price. Long put cost is subtracted from cash and short put proceeds are applied to cash. Not allowed for IRA accounts.	Must maintain initial margin.	N/A
Short Butterfly Call
Two long call options of the same series offset by one short call option with a higher strike price and one short call option with a lower strike price. All component options must have the same expiration, same underlying, and intervals between exercise prices must be equal.	Aggregate call option second lowest exercise price - aggregate call option lowest exercise price. Long option cost is subtracted from cash and short option proceeds are applied to cash. Not allowed for IRA accounts.	Must maintain initial margin.	N/A
Long Box Spread
Long call and short put with the same exercise price (“buy side”) coupled with a long put and short call with the same exercise price (“sell side”). Buy side exercise price is lower than the sell side exercise price. All component options must have the same expiration, and underlying (multiplier).	None. Long option cost is subtracted from cash, and short option proceeds are applied to cash.	None.	N/A
Short Box Spread
Long call and short put with the same exercise price ("buy side") coupled with a long put and short call with the same exercise price (“sell side”). Buy side exercise price is higher than the sell side exercise price. All component options must have the same expiration, and underlying (multiplier).	102% * market-to-market value or strike differential * contract multiplier, whichever is greater	Must maintain initial margin.	N/A
Conversion
Long put and long underlying with short call. Put and call must have the same expiration date, underlying (multiplier), and exercise price.	Long stock and put cost is subtracted from cash, and short call proceeds are applied to cash. Equity with Loan Value of long stock: Current market value or call aggregate exercise price, whichever is lower.	(10% * aggregate exercise price).	Long stock and put option cost is subtracted from cash, short option proceeds are applied to cash.
Reverse Conversion
Long call and short underlying with short put. Put and call must have same expiration date, underlying (multiplier), and exercise price.	(50% * short market value) + (Put Exercise Price - Stock Market Price or 0, whichever is greater). Long call cost is subtracted from cash, short stock and put proceeds are applied to cash, and short position is subtracted from equity with loan value. Not allowed for IRA accounts.	(10% of Put Exercise price) + (Put Exercise Price - Stock Market Price or 0, whichever is greater.	N/A
Protective Put
Long Put and Long Underlying.	Long stock and put cost is subtracted from cash. Same rules as cash for IRA Margin Accounts.	((10% * aggregate put exercise price) + (100% * out of money amount)) or stock maintenance margin requirement, whichever is lower.	Long stock and put option cost is subtracted from cash.
Protective Call
Long Call and Short Underlying.	Long call cost is subtracted from cash, short stock proceeds are applied to cash, and short position is subtracted from equity with loan value. Not allowed for IRA accounts.	((10% * aggregate call exercise price) + (100% * out of money amount)) or stock maintenance margin requirement, whichever is lower.	N/A
Iron Condor
Sell a put, buy put, sell a call, buy a call.	Aggregate short put strike - aggregate long put strike	Same as Initial.	N/A