The loan is linked to your account, not a specific security, eventhough this is those securities that allows you to borrow. If the margin requirement for one security goes to 100%, they won’t liquidate anythig on the account if the margin requirement of other securities are enough globally
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That was a little joke, of course, no offense meant.
Yes it is exactly this. Although IB seems to be less predictable with margin ratios these days, but who can blame them?
For open positions you should see margin requirements as cash value, i.e. what you have calculated by position value * margin ratio. - No, sorry, only for futures and options.
With portfolio margin you should be able to reduce margin requirements by adding options, e.g. long puts or short calls to long stocks. Never tried it myself.
Hi all,
I need 50k in 3-4 days and would like to borrow against my portfolio to have this money available.
Is this possible?
If so, what are the step by step of doing so?
I have a non margin account at the moment.
Thank you
How much do you have invested?
You need to be careful and take a safety margin.
If there is a -60% from current valuation, your margin could be called. iBKR will sell all your existing positions at the worst time to finance your loan.
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One day to change the account type.
One day to withdraw. Should arrive the same day if you send the withdrawal order in the morning.
No problem as long as you stay within 25%, short term even 35% should be fine.
You may want to check what securities you have and what their margin requirements. Some ETFs from SIX has 100% margin requirements, so no borrowing.
It might also raise a red flag that you change the account type and immediately withdraw a large amount…
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Should I change the account type to Margin or Portfolio Margin?
The loan will be around 25% of what is currently invested
Better not Portfolio Margin. For this they specifically indicate that changing to Portfolio Margin and directly taking lots of leverage will raise a red flag.
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Sounds good, thank you for the help.
I will transfer arround 35k CHF but I need to take out 50k EUR.
And I will transfer the remaining 15k CHF on the 25th so I believe I should be good.
Thank you for the help!
My big problem is that the time it would take to convert the CHF into EUR and make the withdrawal is already too long to be able to close the deal.
Let’s see if it works better with margin
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I kind of do it from time to time, but not for such amounts. Withdraw couple of thousands EUR to use during a vacation, repay later.
Hi guys,
So I will share my experience with Margin in IB.
Day 1: Change Account Type from Cash to Margin.
Day 2: Account Type is changed and I can now withdraw more money than what I had in cash.
I had 30k CHF and withdrew 30k EUR. I had -30k EUR and +30k CHF. (later during that day, I changed 29k CHF to 30k EUR and was no longer -30k EUR)
Since the withdraw was before 11am, the money arrived in my Portuguese bank account by 3pm on day 2.
I ended up not using margin (I would have taken out 20k but withdrew from an EUR investment).
Context: The purpose of this was to sign a contract to buy an apartment that is being built and was a great opportunity (100k discount vs similar apartments in the area, while being brand new). I had to get 50k EUR in 3 days or I would risk losing the deal.
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Hello all,
So it would seem that when I opened my account many years ago, I put down 0 years of experience for options and margin. I had to take an eligibility quiz, which by all accounts wasn’t too difficult having used the IB campus platform online, but it didn’t seem to allow me afterwards. Does anyone have any experience with this? I want to change my account from ‘Cash’ to ‘Margin (most common)’, and withdraw a very small amount as a line of credit.
Thanks
Update your experience to at least 2 years and a certain amount (dont remember if it was 10 or 100) of options you trade.
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Did you select “Hedging” or “Profits form active trading and speculation” to meet the criteria?
It would seem that I chose “preservation of capital and income generation” and “Growth” when I first set up the account, but then in order to qualify for Margin it would seem that I would have to change to a different one - you can only chose two out of the four!
- Preservation of capital and income generation
- Growth
- Hedging
- Profits from active trading and speculation
I dont remember exactly, but I think so. Essentially pretend you‘re an options trader with experience.
Some questions that are bugging me a bit:
-
How much margin can we practically have, without the tax office having a problem with it? The “rule” says margin interest paid should be lower than taxable income received (dividends etc.). Anyone tested the limits or knows real world examples?
-
Anyone else actually also thinking this rule is very weird thinking about it? Currently we are in a high interest regime and you pay 6.8% on USD at IB. Two years ago we paid like 2%. Why is that you could basically have 3x as much margin two years ago considering this rule (as dividend yields are roughly the same in both environments)? Why is it fine for the tax office to take on more margin at low interest? Also why am i allowed to borrow more in CHF (as low interest) than USD? I have never read any justification anywhere for this rule. Maybe it has to do with being able to deduct the loan and ensuring that you will not deduct more than the income you generate? (That just sprung to my mind, it’s probably that thinking harder about it)
-
Now concerning practical limits: Let’s say USD ~6% interest (some near term rate cuts already implied) and dividend yield/interest of ~2% on average over your investments. This should mean I can borrow 50% of my portfolio value on margin without violating the rule right? As you are then leveraged 150% and those 150% have a yield of 2% → lets say 1000$ + 500$ borrowed → 1500$x 2% = 30$ income; 500$ borrowed x 6% interest = the same 30$
-
In CHF I could basically borrow double the amount at <3% interest
→ Someone having some practcial experience here or spotting a flaw in my thinking?
I’m trying to assess how much margin I can practically and safely take on, without causing issues.
→ Another consideration I have: DA-1 reimbursement for US withholding tax is also somehow affected by me deducting my margin loan from taxes. But apparently it’s a super difficult formula. Does anyone have some formulas I can use to assess that?
Basically I want to know how much DA-1 reimbursements I lose with very high margin loans, as that could severely reduced the effectiveness of the margin loan investments.
Also I want to assess how much sense it can make sense to switch to IE domiciled etfs, if I get too much of my DA-1 refused due to high margin. Although my factor funds are not available in IE, I’d bite the bullet, go full factor on US side and then do something like EXUS + emerging markets (and some swiss stock sprobabaly) as Ireland funds. A big tax drag is not worth it to stick to teh factor funds.
E: Is this formula applicable still?
I just punched some numbers on a spreadsheet and basically at 45% margin in USD at 6% interest, you get 0% (zero) back from DA-1, the same in CHF at say 2.5% and you still get 85% back of your DA-1 when the formula holds true.
That’s pretty crazy tbh.
Of course if you deduct 6% from taxes, you get effectively 1.5% back at 25% marginal tax rate and when deducting CHF 2.5% you only get back 0.625%.
And getting more yield then 2% also massively changes the picture again. This whole thing seems to be very sensitive.
Now what is the most optimal/ tax efficient way is the question…
These are very interesting questions and I find myself in a similar situation, with quite some margin loan (in CHF) + mortgage interests, claimed DA-1 etc.
I’m eagerly waiting for knowledgeable colleagues to step in and express their opinion 
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This. The tax office has no interest in the amount of risk you take or its impact on the economy. It cares that you don’t “pay” negative taxes (deduct more than your taxable gains).
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And for Mortgage/other swiss loans it‘s probably fine as it ensures the mortgage payments are taxed by the respective lender in Switzerland, I guess (+ supporting swiss economy).
Hi all,
I didn’t know where else to put this question.
I recently changed my IBKR account from cash to margin and would like to withdraw a margin loan (just 200 CHF for testing). However, when I go to the withdrawal menu, the “Cash Available for Withdrawal” shows only the amount I already have available in cash (CHF) and not the value of my portfolio (which is entirely in USD). My account type clearly shows “Margin”
What am I missing?