Posted yesterday about after hours risk, and someone pointed out I might not be allowed to open certain trades in the first place- but IBKR and TOS margin requirements page don't deal with this situation, for example:
At 11 AM QQQ is at 449. I open 25 short spreads of 450 short calls, 460 long calls. That's 25,000 at risk (ignoring premium recvd). My account is net 150k with Portfolio margin, so I'd normally assume that trade would be allowed as the 25,000 risk is way below the 150,000 account value, not even considering 6 to 1 PM margin leverage.
But it's exp day, and at 355 pm qqq is at 449.9, so I'm feeling brave and don't buy to close my 450 short calls. After hours I get unlucky and qqq goes to 455 and I get assigned on my 25 450 shorts, and my 460 longs have already expired uselessly at 4 PM, and I wake up next day short 2500 shares of qqq with value of 1.2 million, way more than I'm normally allowed to have on 6 to 1 portfolio margin with 150k in account balance. So I'd just buy to close short shares the next day based on likely margin call.
But 2 questions
-Would they even let me make this trade in the first place, early in day on an expiration day, or are IBKR/TOS or other brokers likely programmed to see this unusual exp day risk of "after hours short gets assigned, long is expired"?
-Any chance they monitor this close to expiration, and would autoclose it if short strike even close to underlying?
Thanks.
Opening a 0dte short spread where after hours risk of assignment exists.
byu/thinkofanamefast inoptions
Posted by thinkofanamefast
3 Comments
I’m not sure, but at 3:55 pm ET, the risk on the short call spread is going to look like a short position with very short gamma (the 10 pt OTM long will typically offer no real benefit for risk). Ie, I would double check the risk/margin values because they might be much more restrictive in the first place (possibly preventing the ability to open the full 25-lot)
(1) they probably will let you open this spread.
(2) they will probably close your position for you with about 30-60min left in the day, if you still have it open.
You cannot rely on the broker to manage this risk for you. If they do not liquidate you and you end up assigned on your shorts, you are completely on the hook for all losses, including a situation where the overnight move wipes out your account and takes you to negative net liq.
Your brokers are well aware of all this stuff.