I want my liquidated position to be reinstated.

Overview: 

IBKR employs a proprietary algorithm which identifies positions for liquidation.  This is a complicated formula which seeks always to make the best possible liquidation.  There are numerous factors involved in the liquidation algorithm which are taken into account prior to the creation of a liquidation trade.

Background: 

Your liquidated securities, if part of a valid liquidation, will not be taken back, or reinstated.  Going forward, I want to point you towards a feature that might be of help.  In the Account Window, under Portfolio, you will have your positions listed.  You can highlight a position that you would prefer not be liquidated prior to others in the account in the event of a liquidation, by left-clicking it.  Once this position is highlighted, right-click on the line.  In the box which appears choose “Set Liquidate Last”.  This feature allows you to mark those positions which you would prefer to hold over others.  IBKR will try to honor those requests, but this is merely a request and we cannot guarantee that the chosen position won’t be liquidated.

What happens if I’m assigned stock at expiration, and my account doesn’t have the funds necessary to satisfy the margin requirement?

Overview: 

If an expired USD option position results in an automatic exercise (the Options Clearing Corporation will automatically exercise any stock option which expired 0.01 or more in-the-money), and the resulting stock position causes a margin deficit in your account, the account would become subject to immediate liquidation.  Given that the OCC processes the exercise and assignment after the expiration Friday close, liquidations in USD equities usually occur shortly after the open of regular trading hours (09:30 EST) on Monday or the next trading day.  Please be aware that any positions could be liquidated as a result of the account being in margin violation—the liquidation is not confined to only the shares that resulted from the option position.  For example, if the account holds currency, futures, future options positions, or any non-USD positions, such products may begin trading prior to Monday morning and, as such, liquidation of any of these positions could occur in order to meet the margin deficit which resulted from an options exercise.

Background: 

Account holders should refer to the Characteristics and Risks of Standardized Options disclosure document which is provided by IBKR to every option eligible client at the point of application and which clearly spells out the risks of assignment.  This document is also available online at OCC's web site.

What happens to the USD equity option that I am long at expiration?

Overview: 

There are two scenarios which could occur if a long option is taken to expiration.  If the option is out-of-the-money at expiration and you do not choose to exercise it, the option will expire worthless, and your losses will consist of the premium that was paid to acquire the option.  If the option is in-the-money at expiration by 0.01 or more, it will be automatically exercised on your behalf (unless you previously chose to lapse the option) by the Options Clearing Corporation (OCC).  The OCC processes monthly expiration options on the third Saturday of the month, or the day after Friday expiration.  The resulting long or short position will be put into the account, effective on the Friday trade date.  If the account has sufficient margin to satisfy the requirement on the resulting position, it will then be up to the account holder to decide what they want to do with the position.  If the resulting position causes a margin deficit, the account will be subject to liquidation at a time which is defined by the holdings within the account.  Please be aware that any positions could be liquidated as a result of the account being in margin violation—the liquidation is not confined to only the shares that resulted from the option position.  For example, if the account holds currency, futures, future options positions or and non-USD product, the account may begin to liquidate to meet the margin deficit as soon as a corresponding market opens.

Background: 

Account holders should refer to the Characteristics and Risks of Standardized Options disclosure document which is provided by IBKR to every option eligible client at the point of application and which clearly spells out the risks of assignment.  This document is also available online at OCC's web site.

Why did IBKR force liquidate positions in my cash account?

Overview: 

Position liquidations within a cash account generally result from one of the following two situations:

 

1. The account incurs a negative, or debit, cash balance due to the assessment of fees for items such as market data subscriptions or monthly minimums.  As a cash account, by definition, is precluded from holding a negative cash balances in any currency, the existence of a negative balance will result in IB force liquidating positions. Note that our system is designed to liquidate positions in a minimum of 100 share increments.

 

2. A long equity call or put option was automatically exercised by the clearinghouse.  In the case of US security options, the Options Clearing Corporation (OCC) will automatically exercise all equity options at expiration which are in-the-money by $0.01 or more (see OCC Rule 1804).  If this is a long put exercise and you do not have an existing long stock position in your account, the short position delivered upon exercise will be closed out as cash accounts cannot maintain a short stock position

 

If this is a long call exercise (not offset by the simultaneous assignment of a short call which is part of a spread) and your account does not maintain sufficient settled cash to cover the cost of the stock plus commissions, a forced liquidation will take place typically upon the market open of the next business day. Again, this is due to the fact that a cash account may not hold a negative cash balances in any currency.

 

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