Order Types on Interactive Broker

Preface as seen on Interactive Brokers Quick Trade Platform

Source
https://www.interactivebrokers.com/en/software/tws/basicordertypestop.htm

Type of Interactive Broker Trading Platforms

Interactive Broker provides their clients with multiple platforms to trade at their comfort. I have listed the platforms available and posted some of my findings as I navigate my way figuring out how to use their platforms. 

Note:

Please be sure to have sufficient funds in the currency you are trading in. If not, charges from your margin account applies.

What happens if I trade a product denominated in a currency which I do not hold in my account?

Source: https://ibkr.info/node/722 

Please refer to my post on How to Convert from Base Currency to Trading Currency in Interactive Broker. 

How to Convert from Base Currency to Trading Currency in Interactive Broker

Interactive Broker requires to convert the base currency, SGD to USD before you are able to trade US equities. 

Buy USD, sell SGD. 

As seen on Quick Trade Platform. 

Select "Forex" tab --> Key in "USD" hit enter --> select "USD.SGD" --> key in amount in USD you want to FX for --> amend Limit Price if desired --> submit Order

6 Steps to a Trading Decision

1. State your Forecast

- important to be specific about price of stock and time frame
e.g. XXX stock will rise from $10 to $15 in 20 days. Today is 40 days to expiration.


2. Calculate the Implied Volatility

- volatility percentage in the option pricing formula
- Stock price
- Strike price
- Dividends
- Interest Rates
- Days to expiration
- Volatility


OIC Option Pricing Calculator

Trading Strategies

1. Stock- Oriented Strategy - Covered Straddle

- Normally price rise, sell shares to realise profit. Price drop, buy more shares.

- BUT Alternative to waiting for price rally/ dip --> can use COVERED STRADDLE
--> call + put with the same strike price and expiration date


LONG STRADDLE 

- Buy both call + put
- depending on the underlying stock's direction of movement, either the call will profit more than the put (vice versa)

Option Price Behaviour

1. Strike Price - if the stock price don't move beyond the strike price, then the option will expire worthless


2. Time to Expiration (time decay) - the longer the time, the higher the option price

- the most time decay happens as option is near expiry


3. Effect of Interest Rate on short- term options prices is small

rise in i/r --> rise in CALL, drop in PUT

Option Strategy - Long Stock; Stock UP/ DOWN since Purchase - what next?

Long Stock, Stock UP since purchase

Next steps

1. Take no action - monitor price and change strategy if price outlook sours

2. If want to sell at my Target Price --> write Covered Calls

    - look for Strikes = stock target price, short time to expiration, high option premium

    - at least gain premium from selling

3. Buy Protective Put to protect downside, but require cash outlay to purchase

    - protective put will "kick in" when price drops to strike price

    - "insurance" is valid until expiration date

*Credit: OIC Beginners - Managing Stock Positions

"Best" Option Strategy for each Implied Volatility rank

Implied Volatility percentile	Strategy
Net Buyer
0 to 50	Debit Spread
	Calendar Spread
	Ratio Spread
	Diagonals
Net Seller
50 to 70	Credit Spread
	Iron Condor
	Broken wings butterfly
Net Seller
70 to 100	Straddle
	Strangle
	Wide iron butterfly
Place trades at ~ 45 days to expiration, sell at ~15 days to expiration
25 - 40 days - sell
< 45 days - buy

Credits: Option Alpha

Stock Picking Template

Income Statement

1. Net Profit Margin for the past 10 years 
 - look out for
                 - non- recurring earnings
                 - reserves
                 - subsidiary earnings
                 - depreciation and amortization

2. Net Income > Revenue (for the past 5 years)
    i.e Operating profit margin


Balance Sheet
1. Current ratio > 1
2. Debt ratio 
 - ensure no large debt maturing; may cause re-financing issues
3. Rising retained earning for the past 10 years
4. Current Asset Value (liquidation value) = CA - Liability 
 - if market price < current asset value, then equity is undervalued


Cash Statement
1. FCF/ Share
2. CFO
3. Cash Ratio = (CA - inventory)/ CL


Dividends
1. Dividend yield - look at 5 year average
2. Dividend payout ratio > 50%


Strategy
1. Easy to understand business model
2. "best in breed" firm
3. Mid to large cap firms (< 2 Bn)



Sidenote: refer to CANSLIM

Passive Income Ideas that Anyone Can Try

1. Be a long- term, passive investor

Since my investment horizon is long (meaning I expect to be working for at least the next 30 years), I have the luxury to be aggressive in my investment choices. However, looking at my current state of income and savings, apparently it is rather pathetic. Hence, I have to be pragmatic in my approach.

Below pointers are what I have implemented:

- Buying REITS to collect dividends
- Buying Blue Chip stocks as they are more stable and some even pay out dividends
- Buying into Indexes and ETF's
- Subscribing to Peter Lynch's concept of Beating the Street for my investments

Cheatsheet for ETF Selection

1. Fund's Longevity
How many years have the fund been effective. Longer history suggests stability and track record to see the results. That said, past data does not imply future performance. 

2. Fund Size
At least USD 100 million AUM (Assets under Management). 
Larger AUM is better. 

3. Expense Ratio
The % of funds that the AM (Asset Manager can withdraw each year to pay for the fund's operating expenses.
Lower, better. Vanguard is known for having low expense ratios.

4. Tracking Error
The deviation from the underlying index. 
Less is better. 

How to Do a Fund Transfer for Interactive Brokers

Reference Guide for Doing Funds Transfer for Interactive Brokers Account

Ensure Trading Account is funded before trading. 

User to set up Standing Instructions with Interactive Brokers before Initiating Fund Transfer from your bank account. 

Basic Information for Trading the US market as a Non- US Citizen

As a Non- US Citizen
Not subjected to Capital Gains tax
subjected to 30% Dividend tax
NASDAQ	Indices, Stocks
NASDAQ OMX	Equity Options
NASDAQ OMX BX	ETF, Stocks
NSX	Indices
NYSE	Indices, Stocks, Warrants
NYSE MKT	Small- cap firms
NYSE ARCA	ETF, Stocks, Warrants
Mutual Funds	-
Trading Hours
DST: 1 April to 7 Oct 2018 - 2130 to 0400
Outside DST - 2230 to 1700
Settlement Date	T+2 market days
Settlement Currency	USD or SGD
Trading Lot	1 share
Share price (USD)	Minimum Bid Size (USD)
<1	0.0001
>=1	0.01

Selecting a Brokerage - US Market

US market Stocks	Interactive Brokers	Saxo Capital Markets (Classic Account)
Commission	0.5% (min $1)	0.01 USD/ Share (min. 3.99 USD)
Minimum commission	2.50 USD	15 USD
Minimum Holding Fee	Monthly minimum fee of $10 for accounts between $2000 and $100, 000	0
Platforms	Desktop - Trader Workstation Mobile App (2FA)Webtrader Platform	SaxoTraderGO SaxoTraderPRO
User Support	Hotlines dedicated to various regions, chat bot, FAQ Personal experience: it is hard to get customer support, send emails, received no replies request for callback, received callback after 2 days Tried chat-bot, answers provided were weak and not so relevant. *Update: Hotline works but it is not toll-free, no Singapore hotline and I had to call Hong Kong hotline which is costly. As for the Live Chat function, I had to wait for some time before the next available agent was ready. Response from the agent was slow and the problem was not resolved by the time I ended my Live Chat. (Issue I encountered was Delayed Data not showing on my Trade Workstation	Dedicated SG hotline from 0830 to 1730 Singapore office available. Personal experience: Dedicated account manager based in Singapore to assist with my queries. Follow up call to check on my interest in opening a trading account with them
Firm Reputation	Since 1977 Cannot trade Singapore markets, probably to protect local brokerages' interest since they charge lower fees No impact as I am already using iOCBC to trade Singapore equities	Fully licensed Danish Bank can trade in Singapore markets, but that's not what I'm looking for
Required Minimum in account	10, 000 USD (on website) *Update: IB removed this requirement when I called to check (July 2018) require funding for account activation	2000 USD
Monthly Activity Charges	10 USD monthly, cannot be waived unless- more than 100, 000 USD in Equity- generate more than 10 USD in commission and fees	6 consecutive months of NO trading - 100 USD
Cash Movement	1 free withdrawl per month Thereafter, - 10 USD for Wire transfer- 1 USD for GIRO	No charges if request is submitted via Online 40 USD if done manually
How to Fund the Account	Bank transfer	Bank Transfer - 1 to 5 days Credit/ Debit Card - Immediate, Credit card charges of 0.5 - 2.5% Stock Transfer
US Market Options	Interactive Broker	Saxo Capital Markets (Classic Account)
Trading Fee	0.70 USD/ Contract (min $1)	6 USD (1 -250 Contracts) 3 USD (251 to 1000 Contracts)1.50 USD (1000 to 5000 Contracts)
	Fixed Rates for Infrequent traders Tiered Rates for Active Traders	No Minimum Fees for Contract Options
		No Custody Fees for Contract Options
Bought Options Daily Holding Fees Per Mil	Nil	Less than 30 Days - Nil
		More than 30 Days - 1.10 For Equities Options
Forex Commissions	If Monthly traded amount is < USD 100 Mil then = USD 2 or 0.2 bp * Trade value	As per website, commission for 5 major currencies from as low as 0.4 pips, depending on initial funding and trading volume