Cash account with IB

[ggaribaldi]

Hi all,

planning on opening a cash account with IB. I have euros, have selected euros as a base currency and will be mostly buying and holding (no day-trading).

I don't understand these 2 statements:
a) No shorting of stock or futures day trading benefits (50% of regular margin requirement during the day on certain exchanges).

b) Limited purchase and sale of options and trading is only allowed for products denominated in the base currency of the account

Have no clue what A means. Plus does B mean that i cannot buy stuff on NASDAQ?

Can i sell my stocks freely?

Thanks

 

[ZEPPO]

Hi all,

planning on opening a cash account with IB. I have euros, have selected euros as a base currency and will be mostly buying and holding (no day-trading).

I don't understand these 2 statements:
a) No shorting of stock or futures day trading benefits (50% of regular margin requirement during the day on certain exchanges).

b) Limited purchase and sale of options and trading is only allowed for products denominated in the base currency of the account

Have no clue what A means. Plus does B mean that i cannot buy stuff on NASDAQ?

Can i sell my stocks freely?

Thanks

Er...Sorry if I come across as a bit thick, but...Why don't you ask them directly? They are the ones in the best position to suply you with the right answer.
Just a thought.
Eduardo.

 

[BTippen]

a) shorting stocks means u make money when the price falls. IE they let u borrow the stock and sell it, then buy it back hopefully at a lower price so u make money.

b)they limit your trading in options and you can only trade items that are traded in your base currency in your case euro. So no nasdaq trading.

but it would be a good idea to ring them as they can explain how it effects what u want to do.

 

[ggaribaldi]

a) shorting stocks means u make money when the price falls. IE they let u borrow the stock and sell it, then buy it back hopefully at a lower price so u make money.

b)they limit your trading in options and you can only trade items that are traded in your base currency in your case euro. So no nasdaq trading.

but it would be a good idea to ring them as they can explain how it effects what u want to do.

Thanks for the precise reply BTippen, i'm actually waiting their official answer. But well i fail to see the rational behind these limits. Why would it be preferred to have a margin account? Isn't it riskier also for them?

Thanks

 

[Hittfeld]

May I disagree?
I guess those two statements (A and B) must be considered FOUR cases actually:

a) 1. No shorting of stocks - Impossible in a cash account it you won`t allow any margin or credit. But shorting is risk at the utmost -- a german billionaire learnt this the hard way and committed suicide when volkswagen went from some 50 € straight over 300!

a) 2. No futures intraday margin reduction, because it would mean credit facility granted by broker.

b) 1. Limit trading options ..... Selling options poses also an unlimited risk.
b) 2. Only base currency ...... Because there would be a currency risk not limited by stops.

Just my thoughts, but might be some rationale or????

Regards

Hittfeld

 

[ggaribaldi]

Hi Hittfeld,

thanks for the answer. I'm a newbie as you can tell ;-)

My use-case would be:

- transfer my few euros
- buy and hold a couple of stocks on NYSE, NASDAQ and BIM
- sell but only if the **** really hits the fan (need a stop-loss feature)

Maybe IB would be overkill for this. Any other broker you guys could suggest? What about the usual Scottrade or eTrade?

Thanks

 

[Hittfeld]

No, I would not consider IB an overkill, actually its the best solution, if you want to use a proper broker. Many people struggle to open an account there. If you are serious with trading and /or investing - stay with IB by all means, learn and trade carefully and build your account, so you could expand the trading universe. Buy and hold? I wonder if thats the very best idea. You`ve applied and do use the IB paper-account ( not the demo) for testing your methods?

Regards

Hittfeld

p.s. I forgot to mention in my last post: Another reason you were granted a cash account only might be lack of proof of experience.

 

[ggaribaldi]

p.s. I forgot to mention in my last post: Another reason you were granted a cash account only might be lack of proof of experience.

Well, no, i still don't have an account with them but i've identified a couple of stocks i'd like to buy. I want to be free to buy and sell using _only_ my own money, hence even if i had a margin account i wouldn't like to use the margin.

I've read thing on how margin accounts and trading in different currencies than the base account work and it seems that they would charge me interest for any losses in a currency different than my base one. See this old post and the reply of the IB rep:

http://www.trade2win.com/boards/brokerages/10334-problems-opening-ib-account.html

Thanks