Calculation and mechanics
Interactive Brokers continuously calculates excess liquidity as the difference between the equity with loan value and the maintenance margin of all positions. The equity with loan value is close to the net liquidation value but contains only values that count as collateral.
The cushion is excess liquidity as a percentage of the net liquidation value. An account with 100'000 equity with loan value, the same NLV and 40'000 maintenance margin has 60'000 excess liquidity and a cushion of 60%.
If excess liquidity falls below zero, Interactive Brokers can close positions automatically, usually without a deadline for a margin deposit. The value changes continuously, because account value and margin change with prices and positions.
Cushion = excess liquidity / NLV x 100
Distinction
Margin describes how much collateral the positions tie up, excess liquidity how much room remains above it. In strong market moves this room can shrink from two sides: the account value falls while margin requirements rise. A cushion that looks comfortable today can therefore deteriorate quickly.
Available funds are a related Interactive Brokers value: equity with loan value minus initial instead of maintenance margin. They show the room for new positions, excess liquidity the reserve for the existing ones.
Related terms
- Net Liquidation Value (NLV, account value, net liquidation)
- Margin (Initial and maintenance margin, margin requirement, collateral)
- Max Loss (Maximum loss, max loss (limited), option max loss)
- Premium/Margin (Return on margin, remaining/margin p.a., remaining yield)
All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.