Sunday, January 18, 2015

Trade summary: on-sale!

I don't have "the brick" today on this trade...  I was running out the door to a gig when I saw the opportunity.

With the Swiss Central Bank deciding to un-cap the exchange rate from the Swiss Franc vs. the Euro, there was a trememdous pop in the value of the Swiss Franc, and corelating crash in the value of the swiss stock market.  Relatively speaking valuations stayed the same, but it doesn't look good if you're a Swiss national with all of your holdings in Francs.

On that news, FX brokers (foreign exchange brokers) might have had a client or 12 who had been over-leveraged and the resulting changes in exchange rates might have incurred margin calls and/or delinquent accounts requiring the FX broker to eat the loss.

As a result, IBKR (Interactive Brokers) was sympathetically down 25% from the previous day in pre-market trading. 

Interactive Brokers however has a very strict margin policy: If you're a client (which I am) and you do something that falls afoul of their margin requirements, they automatically and mercilessly liquidate your account positions until you are compliant.  Thus, they have very little risk of having a loss in this type of situation.

So on no fundamental change to the company, I added to my position for about $4.50 cheaper than the previous close. 

Trading during the day snapped back up to almost where it was the day before...  Market sentiment did make it close a little bit down from the previous, but all within a reasonable range.

IBRK is an interesting play in rough markets. Clients often trade MORE during market slides so their revenues go UP from the increased trading activity.

My position of IBRK was originally only 100 shares.  I now have 200 with an average price of $27.2625.  As of Friday close, it's $28.05 So I'm looking at a whopping unrealized gain of $155.50 USD.

As usual, I'm going to start writing covered calls on this position 1 month out, $1-2 higher than my average price. With the hopes lowering my cost basis and never being assigned.

If calls look like they will be assigned, I might roll up and away, or I might just take the assignment and write some new naked puts to re-aquire the position. 

The only downside of owning them as a non-US person: the IRS does have sticky fingers and holds on to 15% of the dividend.

Stay hungry my friends.


  1. You can claim the foreign tax credit and have the 15% withheld amount refunded to you.

    1. That I already do... but I want the money NOW! The extra hassle of paperwork is annoying for something I get back anyway. The process needs to be streamlined or the withholding tax eliminated.

  2. So if I'm -$100 in margin they will liqudate my positions with no mercy :(

    1. Yes, but they don't "liquidate ALL". They trim until you are back in compliance, starting with the position which is the MOST at risk to your portfolio.