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The Box Spread Trick: Get rich slightly faster
Mike Lin10

Here's a thread I found with some interesting information (albeit by anonymous Internet commenters :) It ends up, on page 5, with a suggestion similar to yours -- open a GTC order to add to (not close) your position, at a price that won't execute, but isn't so crazy as to imply a margin violation were your position to be marked there.

Now, I don't see any harm in putting out there an offer to borrow at negative interest; but it's still not obvious to me why this truly addresses the risk. Do we need such orders to backstop each individual leg as well as the ... (read more)

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The Box Spread Trick: Get rich slightly faster
Mike Lin20

The linked WSB post alludes to one more obscure risk with IBKR in particular,

Portfolio margin traders can suffer margin calls if you have a bad mark/quote. This is a huge problem at Interactive Brokers...You need to place a GTC close order at a very favorable unrealistic price to always quote your box.

Brief Googling does indicate there's some history of IBKR customer disputes about liquidations triggered by some weird, transient price tick in a thinly-traded contract. I'd like to think that wouldn't happen in SPX of all symbols, but, we ought to imagine sh... (read more)

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1Thomas Kwa
I'm confused too. Say you sold 10 3200/3400 box spread contracts for $196k a while ago, for a "par value" of $20k per box or $200k total. Since the exact box spread you sold is rarely traded, the best bid in the order book will be the sum of the 4 individual leg bids, and likewise the best ask will be the sum of the 4 leg asks. This makes the spread very wide, maybe $15k bid and $25k ask, and I'm not sure how IBKR values your position, maybe it just takes the midpoint. Let's say it's normally -$197k at some point in time. Now say someone buys a 3200/3400 box for $25k. I'm guessing that IBKR's algorithm could see the last traded price, decide your position is worth $-250k now, and liquidate you. If you keep an open order to buy back the box for say $16k each, nothing changes and in fact the midpoint price would increase. Maybe the commenter meant to say you should keep an open order to sell more box spreads for slightly above par value?