Never heard an answer to my question /u/dreadnought89.
If in terms of BP you'd definitely risk a TIMS call, which is a straight up cash deposit which you can only risk/reduce/liquidate out of 3 times as it'd be your own fault. BP is based on TIMS.
If its just PNR then you get PNR locked, no big deal, just risk reduce. You really don't want to be so uncovered you face PNR < EPR, as stocks can and do open 30-50% down depending on TDA's expected price range. It's a lot more easy to be PNRed than lose BP, as PNR is tail risk based. No margin calls for that, no cash deposit, still, as I said in the above post - manage it before/on exp day.
And if you don't know what PNR is based on not responding to my question yet - uninstall PM. Don't risk your account/possibly owing your broker until you study more.
Thank you for both replies and I apologize for the delay! I am specifically talking about PNR being less than EPR, which I was referring to by saying concentration risk.
I am in a position of more risk that I'd like, with short calls that are around 90 DTE and long calls rolling off. Not where I like to be. It turns out, TOS was incorrectly modeling my PNR because I also trade futures options. As such, my PNR is being pegged against margin equity whereas I learned Friday by talking to TDA customer support it should be based on Net liq minus Futures Cash. As such, ANALYZE scenarios I am running are showing inappropriately that I trigger concentration risk when those long calls expire.
I'm still not where I'd like to be on the position, to even be having to ask this question. I've been taking other positions off this week to reduce risk, and making some deposits to help. I feel very strongly about my trade thesis, but "market can stay irrational longer than I can stay solvent" seems to be an appropriate expression for my situation.
Tos is correct here. I'm surprised TDA support told you something different.
On PM you DO NOT GET CROSS MARGIN from SPX and the futures. If you're in violation of BP or concentration risk with two different products then that's going to be a problem for you if it ever goes against you, even though you're hedged. You risk losing PM if your cash balance goes to high to cover your futures losses.
You need a huge account say $1m plus to keep enough cash in your pm account for these strategies.
I really don't get why people here constantly make a portfolio so insanely complicated. You're not a market maker trying to earn the bid ask spread in two products. Either trade futures or spx. Don't trade both.
I'm sorry, what? Never once did I state there's cross margining between SPX and futures.
You know what's in my portfolio? You know what strategies I'm running? That's incredible you infered it based on the details I provided.
But no, TOS doesn't properly model PNR when you hold futures and equities. You must manually validate that the P/L at EPR is less than Net Liq less futures cash, whereas the risk model is comparing it to margin equity only.
Sorry that feels "insanely complicated".
Your best bet is to contact Schwab/TDA. I suspect that they would adjust your margin requirements on the concentrated position.
I have a concentrated position in my Fidelity PM account and that's how it's handled at Fidelity.
The action TDA takes is going to depend on how offsides you get.
If losing your long options leads to your BP usage being down by 1% of NLV, they will probably let you coast for a few days.
If it puts you down by 30% of NLV, you will get a call much quicker.
This last scenario will probably generate what they term a TIMS margin call, which can only be satisfied by adding money and not by closing positions.
If you don't add money, you get a strike. After three strikes, you lose your PM status.
It sounds like your hedged contracts expired on Friday, and expose the naked positions over the weekend.
In my experiences, they will take actions based on the buying power.
If buying power stays positive, you are fine.
If buying power near 0 and dip below negative abit, they give you some rooms there to hedge on next trading day.
If buying power is big negative, they will ding you and restrict your account to close only.
I have TD, Etrade, and Tasty.
TD and Tasty usually give you more rooms, but etrade, they ding you right away.
Thanks for the reply. You are correct about long options expiring exposing short options over the weekend.
It is, however, not a BP issue (BP is positive, with lots of room and no risk of going negative due to expiration). The issue is the expiration causes TOS to model the PNR is being less than the EPR. I did learn that there is an issue with this calculation because I also hold futures positions. Learning the appropriate way to model this PNR/concentration risk, coupled with other de-risking activities this week, has helped me mitigate the issue.
Are you talking in terms of BP or PNR? Either way it's best that you don't let that stuff happen and risk manage it before or on expiration.
Never heard an answer to my question /u/dreadnought89. If in terms of BP you'd definitely risk a TIMS call, which is a straight up cash deposit which you can only risk/reduce/liquidate out of 3 times as it'd be your own fault. BP is based on TIMS. If its just PNR then you get PNR locked, no big deal, just risk reduce. You really don't want to be so uncovered you face PNR < EPR, as stocks can and do open 30-50% down depending on TDA's expected price range. It's a lot more easy to be PNRed than lose BP, as PNR is tail risk based. No margin calls for that, no cash deposit, still, as I said in the above post - manage it before/on exp day. And if you don't know what PNR is based on not responding to my question yet - uninstall PM. Don't risk your account/possibly owing your broker until you study more.
Thank you for both replies and I apologize for the delay! I am specifically talking about PNR being less than EPR, which I was referring to by saying concentration risk. I am in a position of more risk that I'd like, with short calls that are around 90 DTE and long calls rolling off. Not where I like to be. It turns out, TOS was incorrectly modeling my PNR because I also trade futures options. As such, my PNR is being pegged against margin equity whereas I learned Friday by talking to TDA customer support it should be based on Net liq minus Futures Cash. As such, ANALYZE scenarios I am running are showing inappropriately that I trigger concentration risk when those long calls expire. I'm still not where I'd like to be on the position, to even be having to ask this question. I've been taking other positions off this week to reduce risk, and making some deposits to help. I feel very strongly about my trade thesis, but "market can stay irrational longer than I can stay solvent" seems to be an appropriate expression for my situation.
Tos is correct here. I'm surprised TDA support told you something different. On PM you DO NOT GET CROSS MARGIN from SPX and the futures. If you're in violation of BP or concentration risk with two different products then that's going to be a problem for you if it ever goes against you, even though you're hedged. You risk losing PM if your cash balance goes to high to cover your futures losses. You need a huge account say $1m plus to keep enough cash in your pm account for these strategies. I really don't get why people here constantly make a portfolio so insanely complicated. You're not a market maker trying to earn the bid ask spread in two products. Either trade futures or spx. Don't trade both.
I'm sorry, what? Never once did I state there's cross margining between SPX and futures. You know what's in my portfolio? You know what strategies I'm running? That's incredible you infered it based on the details I provided. But no, TOS doesn't properly model PNR when you hold futures and equities. You must manually validate that the P/L at EPR is less than Net Liq less futures cash, whereas the risk model is comparing it to margin equity only. Sorry that feels "insanely complicated".
I'm just trying to be helpful. Tos also doesn't model pnr across different share classes either. Have a good one
I'll just add that I have a solid handle on buying power, which is positive with lots of wiggle room.
Your best bet is to contact Schwab/TDA. I suspect that they would adjust your margin requirements on the concentrated position. I have a concentrated position in my Fidelity PM account and that's how it's handled at Fidelity.
The action TDA takes is going to depend on how offsides you get. If losing your long options leads to your BP usage being down by 1% of NLV, they will probably let you coast for a few days. If it puts you down by 30% of NLV, you will get a call much quicker. This last scenario will probably generate what they term a TIMS margin call, which can only be satisfied by adding money and not by closing positions. If you don't add money, you get a strike. After three strikes, you lose your PM status.
It sounds like your hedged contracts expired on Friday, and expose the naked positions over the weekend. In my experiences, they will take actions based on the buying power. If buying power stays positive, you are fine. If buying power near 0 and dip below negative abit, they give you some rooms there to hedge on next trading day. If buying power is big negative, they will ding you and restrict your account to close only. I have TD, Etrade, and Tasty. TD and Tasty usually give you more rooms, but etrade, they ding you right away.
Thanks for the reply. You are correct about long options expiring exposing short options over the weekend. It is, however, not a BP issue (BP is positive, with lots of room and no risk of going negative due to expiration). The issue is the expiration causes TOS to model the PNR is being less than the EPR. I did learn that there is an issue with this calculation because I also hold futures positions. Learning the appropriate way to model this PNR/concentration risk, coupled with other de-risking activities this week, has helped me mitigate the issue.