How can I avoid account liquidation?

To avoid account liquidation, it is crucial to maintain positive balances and monitor key metrics in your Interactive Brokers (IBKR) account. Here is a comprehensive guide to help you prevent liquidation:

1. Understand Account-Specific Requirements:
   • Reg T Margin accounts: Maintain positive Excess Liquidity at all times and positive SMA (Special Memorandum Account) during the Reg T check period starting at 15:50 ET through 17:20 ET.
   • Margin or Portfolio Margin accounts: Keep positive Excess Liquidity at all times.
   • Cash accounts: Maintain a positive cash balance at all times.
2. Monitor Key Metrics:
   • Excess Liquidity:
     • This represents the amount of additional equity in the account above the total Maintenance margin requirements and when negative the account is subject to Liquidation.
     • Ensure it remains positive at all times.
     • Excess Liquidity is calculated as Equity with Loan Value minus Maintenance Margin.
   • SMA (Special Memorandum Account):
     • This is a Reg T line of credit that is created when depositing funds and when the market value of securities in a margin account increases.
     • Keep SMA positive and be sure to review your SMA value between 15:40 ET and 15:50 ET before the Reg T check period begins.
     • Maintaining a positive SMA allows you to carry your open positions thru the Reg T Check overnight period without risk of a Reg T Liquidation.
   • Equity with Loan Value:
     • A drop in this value can reduce your account's Excess Equity.
3. Be Aware of Additional Factors:
   • Accrued but unpaid Interest Receivable or Dividends Receivable are not included in Equity with Loan Value until paid and can affect your ability to carry positions.
   • Interest Payable or Dividends Payable are removed from Equity with Loan Value when accrued but not yet debited and can impact your position carrying ability.
4. Regular Monitoring:
   • Use these tools to monitor your account's margin compliance in real-time:
     • TWS (Trader Workstation): Account Window
     • Client Portal: Portfolio - Positions page
     • IBKR Mobile: Account-Funds screen
5. Take Preventive Action:
   • If your Available Funds and Excess Equity approach zero or become negative:
     • Add funds to your account
     • Reduce positions by submitting closing positions
     • Hedge positions to reduce overall portfolio risk

Remember, accounts are subject to liquidation when Excess Liquidity becomes negative or SMA is negative during the Reg T check period. By consistently monitoring these metrics and maintaining positive values, you can effectively prevent automatic liquidation of your positions.

Additional Information

• Why Did I Receive a Notice that the Financial Capacity in my Account is Less than 10% Above the Current Margin Requirement when My Stock Positions are Fully-Paid?
• What is SMA and How Does it Work?