Why did IB force liquidate positions in my cash account?


Position liquidations within a cash account generally result from one of the following two situations:


1. The account incurs a negative, or debit, cash balance due to the assessment of fees for items such as market data subscriptions or monthly minimums.  As a cash account, by definition, is precluded from holding a negative cash balances in any currency, the existence of a negative balance will result in IB force liquidating positions in an amount sufficient to restore the cash balance to a credit.


2. A long equity call or put option was automatically exercised by the clearinghouse.  In the case of US security options, the Options Clearing Corporation (OCC) will automatically exercise all equity options at expiration which are in-the-money by $0.01 or more (see OCC Rule 1804).  If this is a long put exercise and you do not have an existing long stock position in your account, the short position delivered upon exercise will be closed out as cash accounts cannot maintain a short stock position


If this is a long call exercise (not offset by the simultaneous assignment of a short call which is part of a spread) and your account does not maintain sufficient settled cash to cover the cost of the stock plus commissions, a forced liquidation will take place typically upon the market open of the next business day. Again, this is due to the fact that a cash account may not hold a negative cash balances in any currency.