Margin Allocation [%]
1. Overview
The Margin Allocation [%] feature enables dynamic position sizing.
Instead of defining a fixed number of contracts, a percentage of the account value is set as the maximum margin allocation per trade.
The actual number of contracts to be opened is calculated automatically immediately before order placement.
The calculation is based on the risk profile of the respective trade. If a clear risk calculation is not possible (e.g., with structures that have theoretically unlimited risk or complex spread structures with different expiration dates), the margin impact reported by the broker is used.
2. Position in the User Interface
The feature is located in the Strategy section.
Activation via the Margin Allocation [%] checkbox
After activation, the Quantity column switches from a fixed contract number to a percentage value.
Additionally, 2 fields appear (Min Qty and Max Qty), which allow you to specify a minimum and maximum number of contracts to be opened.
The percentage can be defined individually per trade.
3. Basic Calculation Principle
The percentage refers to your current account value.
Example:
Account Value: 50,000 USD
Margin Allocation: 10 %
The trade may use a maximum of 5,000 USD in margin.
Before opening the trade, the following is automatically calculated:
- What is the maximum allowable margin budget based on account value?
- What is the expected margin impact of the trade?
- How many contracts fit into the defined percentage allocation?
The final contract quantity is determined immediately before entry.
4. Calculation Logic in Detail
The contract quantity is determined in the following order:
1. Internal Risk Assessment of the Trade
First, the risk profile of the defined structure is analyzed.
For clearly structured strategies with defined maximum risk (e.g., Verticals, Iron Condors, Credit Spreads), a comprehensible margin impact can be derived directly from this.
2. Use of IB Margin (if required)
If an internal risk assessment is not feasible, the margin impact is determined via the TWS interface. This particularly applies to structures such as:
- Short Calls with theoretically unlimited risk
- Combinations with different expiration dates (e.g., Calendar Spreads)
3. Iterative Margin Determination
When using IB Margin, the contract quantity is determined iteratively:
- First, the margin impact for one contract is queried.
- Based on the defined margin budget, a theoretical contract quantity is calculated.
- For this contract quantity, the margin impact is queried again.
- If the resulting margin exceeds the defined budget, the contract quantity is adjusted and checked again.
This process repeats until the contract quantity optimally fits within the specified margin budget.
Internally, the maximum number per trade is limited to 100 contracts.
This limit applies exclusively when using the "Margin Allocation [%]" feature and serves as a safeguard against misconfiguration or unexpected margin calculations.
Note that the margin requirement for the same trade can vary significantly. This depends on the broker's margin rules, which may dynamically adjust margin requirements depending on market conditions.
Already open positions can also have a substantial impact on the expected margin requirement of a new trade.
5. Practical Example
In the screenshot, the Margin Allocation [%] feature is activated.
The Strategy contains 4 trades with the following percentage values:
Trade 1: 5.0 %, Trade 2: 5.0 %, Trade 3: 10.0 %, Trade 4: 20.0 %
Assuming an account with Account Value = 50,000 $. The following maximum allowable margin budgets result:
Trade 1: 2,500 USD, Trade 2: 2,500 USD, Trade 3: 5,000 USD, Trade 4: 10,000 USD