TOS/TDA Transition to Schwab

Lindsey

Lindsey

New member
I hope I am wrong but it appears that once the TDA/Schwab transition happens, there will be a significant change to the required margin with Calendar Spreads on Broad-based Indexes. I have asked TDA about this several times and they send me to this Schwab website for the answer:
https://www.schwab.com/margin/margin-rates-and-requirements

As this reads, the short leg will be margined as naked since the legs expire on different dates. Am I interpreting this correctly?
 
Seems my question has been answered just now by TDA Trader Support:

Dear Lindsey,
You're correct on the margin requirement.
From Schwab's side, the margin requirements on those strategies may increase from TD Ameritrade.
We will of course keep you updated as far as any adjustment that may happen, if they do, concerning this.
We do understand that this may not be welcomed by all clients, and we're more than happy to discuss our reasoning behind this and if we plan on making any changes on the.
I hope you have a great day and thank you again for trading with TD!


Assamoi Edi Christian Jean
Trader Support, Trader Services
 
This is from Slack. Winn chatted with Schwab asking about this:
photo_2023-09-01_17-17-51.jpg
photo_2023-09-01_17-18-18.jpg

From the Schwab margin page:

1693848235622.png

It looks like butterflies and condors will still have normal margin requirements. I would look at replacing calendar spreads with butterflies as they have very similar risk profiles if margin is going to a problem.

Alternatively, if you are trading SPX calendars, you could switch to SPY and 10x the contract size or switch to ES futures options and double the number of contracts. ES would use SPAN margin so should still be ok.
 
tom said:
This is from Slack. Winn chatted with Schwab asking about this:
View attachment 4707
View attachment 4708

From the Schwab margin page:

View attachment 4709

It looks like butterflies and condors will still have normal margin requirements. I would look at replacing calendar spreads with butterflies as they have very similar risk profiles if margin is going to a problem.

Alternatively, if you are trading SPX calendars, you could switch to SPY and 10x the contract size or switch to ES futures options and double the number of contracts. ES would use SPAN margin so should still be ok.
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Yup and a Fly or BWB may turn out to be a better strategy in many situations. Thanks Tom!
 
I just checked and I don't see any difference in margin on the platform unless they will implement it later
 
status1 said:
I just checked and I don't see any difference in margin on the platform unless they will implement it later
Click to expand...
I see the same. I have both brokerage and IRA accounts at TDA and separately, at SCHW. I think this margining is going to be timed on the transition and merge of the accounts. I'm guessing later, as you suggest.

I'll be interested to see if Portfolio Margin accounts get a bit of relief from that margin (I've seen around $44K in TDA PM account). That's for a naked short ATM or a Short Straddle.
 
Lindsey said:
Yup and a Fly or BWB may turn out to be a better strategy in many situations. Thanks Tom!
Click to expand...
Unfortunately, this will hurt or eliminate trading things like the Rhino or @AmyM 's Time Zone trades in a SCHW account.

Also, this impacts many of the adjustment strategies like adding a Calendar below a BWB if the market runs below the tent. Also, Calendarizing a long strike on a Butterfly will blow up margin in a trade. Even a Calendar alone can be a great trade. But it becomes a lot less interesting when only a 5-lot, or fewer.....

This seems absurdly over-protective.
 
I really like IBKR, especially the executions. I've been with them for years.

What's bothersome is the slowly eroding landscape of competition as some of these firms get consolidated. Less competition hurts and limits us as traders.
 
DaveN said:
I see the same. I have both brokerage and IRA accounts at TDA and separately, at SCHW. I think this margining is going to be timed on the transition and merge of the accounts. I'm guessing later, as you suggest.

I'll be interested to see if Portfolio Margin accounts get a bit of relief from that margin (I've seen around $44K in TDA PM account). https://sharpedgeshop.com/collections/japanese-knives/nakiri That's for a naked short ATM or a Short Straddle. fantasy miniature war game
Click to expand...
Absolutely, the timing during the transition and merge of accounts could indeed play a significant role in how the margining adjustments are implemented. It's always a bit of a waiting game during these transitions.
 
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So what are the alternatives to TOS? I have used the TOS Analysis page for years and have not found one like it at any other broker. Since I sometimes trade short term Calendar Spreads (1-3, 1-4, etc.) I feel like I need an analysis/risk platform where I can place orders quickly since hedging and opening/closing positions can happen often during the day. Have tried tastytrade and in my opinion the analysis they provide on their desktop app is horrendous. Maybe I am wrong or am missing something but I feel the need to find another broker soon.
 
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status1 said:
That is correct so why do you need to find an alternative ?
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Margin on Calendars with Schwab is going to be a problem. Just trying to find a platform that has a similar analysis/risk graph where I can place orders directly to the broker. Using the TOS analysis page to define positions, adjustments, hedges and then placing said orders with another broker (tastytrade for instance) is cumbersome and can cause errors.
 
There's no single solution that's comparable, but I use IBKR + ONE. You can do all of your analysis in ONE, and send your orders directly from there to IBKR. ONE uses the IBKR API to facilitate this, and I've found that it works quite well. Some users have had issues with large numbers of positions to be managed, low memory on their desktop/laptop, or trying to use the latest Mac, but otherwise, it should be easy and quick.
 
I understand the problem but as DaveN said there is no easy solution for this so you may have to continue doing it that way There may be other brokers that have good analysis graph but they may also have a platform fee and not sure what is their calendar margin policy
 
status1 said:
I understand the problem but as DaveN said there is no easy solution for this so you may have to continue doing it that way There may be other brokers that have good analysis graph but they may also have a platform fee and not sure what is their calendar margin policy
Click to expand...
In Himanshu's group the other day there was some discussion. Tradestation was mentioned as an idea. Supposedly good commission rates for options and a robust TOS like platform. I continue to use Fidelity (65 cents commission + 4 cents fees, but not really a good analysis platform), Tasty (80 cents commissions for opens, zero for closes plus I think 53 cents fees both ways and a platform that while easy to enter and exit trades, comes up short in the analysis area), and TOS for some limited trading, but am going to consider Tradestation once I can validate what I heard.
 
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I tried Tradestation many years ago and at that time they were not tracking the margin so you would have to figure out how much you think the margin is Not sure if it's the same way now Good luck figuring out how much is your margin on a calendar Needles to say I closed my account after that Tradestation is good for stocks and futures trading but I don't think the options analysis is as good as TOS in my opinion
 
Just to add my 0.02 cents to this thread. My accounts are still with TD Ameritrade. I tried to flatten the delta on a 3/15/04 RUT Rhino trade by buying a call calendar at the .40 delta and received the following message on TOS: "This strategy is not currently being accepted." I guess I'll have to consider selling a put vertical or adding a call butterfly to flatten out my delta in the future. Cheers!
 
What is a 3/15/04 Rhino trade ? Is that supposed to be 3/15/24 or something else ?
Are you by any chance stepping on one of the strikes of the rhino trade ? Because I think that may be the problem. Just my guess
 
I'm sorry for the typo. It is, indeed, a 3/15/24 RUT Rhino trade (expiring in 52 days). Good catch! It is a broken wing Put Butterfly with 1/2 put on 80 days out, and the 2nd half scaled in at 56 days. In the past, a standard adjustment to increase delta would be to buy a CALL Calendar at around the .40 delta above the price action at the time of adjustment. Since the main structure is built with PUTS and the adjustments with CALLS there is usually no issue with stepping on previous positions. However, under this new Schwab policy, one option may now be to sell a put vertical in order to raise the position's delta. While this totally works for increasing the delta it does not add as much theta as buying the Call Calendar. Full disclosure: I decided to close the entire position and reestablish it at the current higher price level. Cheers!
 
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