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Two things that have disappointed me, margin and spreads over brexit.


Guest FF1600

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Guest FF1600

I'm well aware of the volatility we were facing over the run of the official results. If you were short the outright contracts that IG needed to raise margin on I understand but I think they really need to update the margin rules on Calls spreads/Put spreads when using options. I had a Call spread on in EURGBP which had a maximum loss of around £3800 if i held it to expiry yet I had to margin the short position even though I was in fact long a strike 400 ticks below which meant i had a margin call of close to £70k. I have been told the systems cannot calculate spreads like this but this is a basic option spread with limited risk. When I have traded options in the past direct you only get charged premium, I think IG are more than established enough to treat such trades the same and if it cannot be done automated then I expect someone who knows about Options to be able to make the call. 

 

Next up is the actual spreads, I am now aware that the premiums are quoted from banks quotes on the actual strikes and not the underlying which in itself is strange for a company such as IG, yes use them for reference but to use them for actual prices? Its fair that spreads would widen on the run up(last few hours of Thursday) to the volatile moment which prior to Brexit vote seemed to be a maximum of 40 ticks wide for all strikes i remember seeing on EURGBP but even now they are 40+ ticks wide and have been as far as 60 something. This has made a 400 tick call spread that should be onside look to be off side as the spread on premium to get out has moved from 30 ticks to as wide as 100. I have been calling the desk daily since and have been told me they want to bring the spreads in as its not in there benefit but as of yet each strike is still 40< wide. Its made making money out of this almost impossible when it should have been straight forward. 

 

Shame its my first post but there will be praise when things go right and i don't mean in terms of profit. 

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Hi @FF1600, thanks for the post!

 

Sorry to hear you've been disappointed with the temporary changes over the referendum period.  We've tried our best to remain fair and competitive whilst pre-empting volatility, and in fact although some of our spreads were indeed fairly wide, they were better than others we saw in the market!  Not only this, but we have been providing liquidity where many major options providers had completely shut up shop, so that you could continue to trade over this period.

 

With regard to margin rules on the call/put spreads, we do acknowledge and are aware of the limitations currently at play here - this is something we are aiming to address as soon as possible, and we appreciate your frustration.

 

As the desk have been advising you, we do want to narrow the spreads for everyone as soon as possible, but at the moment we are also concerned about the ongoing mitigation of risk and readiness should the markets become extremely volatile again, as is quite possible.

 

We look forward to hearing any further thoughts you may have, and any other Community members'!

 

Thanks,

 

Hannah

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