If you currently have an account with Interactive Brokers, you may be able to use that account and link it to Covestor or open another IB account.
If you do not have an existing account with Interactive Brokers, you will need to establish one there before being able to offer a portfolio on Covestor.
With your permission, Interactive Brokers is able to provide us with a real-time view of your trading activity and cash position for purposes of live replication in client accounts investing in your portfolio.
Once you sign up to manage a portfolio on Covestor, we send you all the information needed to open an Interactive Brokers account linked to Covestor.
The other portfolios on the Covestor platform are managed by third-party investment advisers or hedge fund managers. These portfolio managers fund and trade a proprietary manager-owned brokerage account. In contrast, for each Covestor Smart Beta portfolio, Covestor funds and trades a proprietary Covestor-owned brokerage account. In both cases, each trade made by the portfolio manager (or Covestor) is automatically replicated in clients’ brokerage accounts based on which portfolios the clients have selected to invest in.
Options trading involves a high degree of risk, is highly speculative, and is not suitable for all investors.
Trading options may result in the total loss of premiums and transaction costs.
Options have an inherent leverage because each contract provides derivative exposure to a larger number of the underlying security (usually 100 shares). Each option contract is inexpensive relative to the value of the underlying exposure but a small change in the value of the underlying stock may cause a significantly larger move in the value of the option.
Options have an ‘asymmetrical payoff’, which means that, as the underlying security price changes, the option may change in price by a different amount. This rate varies depending on whether you are long or short as well as a variety of other factors.
Options are time-sensitive investments. If you buy an option, you could lose your entire investment even with a correct prediction about the direction and magnitude of a particular price change. For example, the price change does not occur in the relevant time period (i.e. before the option expires).
Trading halts in the underlying security or other trading conditions (e.g., volatility, system failures) may cause the trading market for one or all options to be unavailable, in which case the holder or writer of an option would not be able to engage in a closing transaction, and would remain obligated until expiration or assignment.
Options are less tangible than some other investments. Stocks offer certificates, and trade on liquid exchanges, but an option is a book entry-only investment without a paper certificate of ownership. While you are not required to hold an option through expiration, the opportunity to relinquish it may be limited depending on market conditions.
You should carefully review The Options Clearing Corporation’s ("OCC") disclosure document “Characteristics and Risks of Standardized Options” and Interactive Brokers LLC’s “OCC Risk Disclosure Statement and Acknowledgements.”
If you are uncomfortable with the level of risk associated with options trading, you should not trade options and should contact Covestor at 1.866.825.3005 to let us know.
Yes. Covestor will attempt to mirror the options trading in the portfolio a client invests in but may not be able to perfectly replicate the same proportion of options in the client’s account that the Portfolio Manager holds in his account. The performance in the client’s account may be significantly different or worse than that of the Portfolio Manager’s account for several reasons, including but not limited to the following:
Integer replication:Covestor is unable to transact partial options contracts. This will result in the client’s account holding proportionally less or more options than the Portfolio Manager. As options are leveraged instruments and options positions often have associated stock positions, this position imbalance between the client’s and the Portfolio Manager’s accounts could result in the client account having significantly different performance, leverage, levels of risk and trading costs than the portfolio he invests in.
Illiquidity:The liquidity of options contracts in a portfolio varies from one day to the next. Depending on when a client chooses to invest in an options portfolio, certain contracts may or may not be easily traded, which may result in the client’s account having different performance, leverage, levels of risk and trading costs than the portfolio he invests in.
Frequent cash flows:If a client frequently redeems options investments from his account, his account will have proportionally more or less options and associated stock positions than that of the Portfolio Manager, as certain positions are liquidated or additional margin is utilized in order to generate cash for redemptions. Performance drift will also result from frequent cash additions to the options investments in the client’s account.