If you have a stop in th ES mini, it should not run it. There was the move in the morning that looking like a 15 point move in less then a minute. No one should have had their stops run past their price if they were on the DOM ladder
ES STOPS are generally executed as a LIMIT order 3.00 points from your trigger price. So, if you are working an order to SELL 5 ES-U1 @ 1169.75 STOP, should your order be triggered the software will SELL 5 ES-U1 @ 1166.75, which will hopefully fill at 1169.75, your stop price. Therefore you should be concerned about anything greater than 3.00 points slippage, which would be extraordinary. Frankly, you're probably going to lose all your money. But good luck. -H
Unnecessary??? You are wrong. Very wrong. If learning options to protect your hard earned money is too complicated you probably shouldn't be trading. Options will save your ass. You could buy a semi deep or deep OTM put on the cheap and trade without fear of a crash. On a side note. I was trading DNDN (long on their approval by FDA) that day and the b/a did not move at all when the crash happened. As if they just stopped trading. Few days later DNDN got approved made 140%. Wanted more but I'll take it.
Nope. The only tool is lower leverage, especially with IB. Bid and ask goes bonkers on options too, so options will be worthless to a computer. Flash crash = auto-liquidation if you can't handle a 5% drop without stops and without OTM options. That said, if you use options to simply create a tool that will return money on a black swan event, that could be a valid reason for using options.
The silver flash crash was the worst I've seen, where it traded down $5-$6 in under 15 minutes I believe. Anybody who was long basically couldn't get out. Not sure if it was somebody sweeping the market or what happened but it was ugly, that's $30k on a 1 lot. So in that case a stop depending on where in the queue it was and how far down would've wiped any small account out.
Probably every "flash crash" in the past 30 years was caused by automated (or automatic, if not automated) positive autocorrelative "safety" strategies -- this includes the '87 crash (portfolio insurance), the May 2010 "flash crash" (market stop orders, after a cascade of other events triggered by a large-scale futures sale), and the silver "flash crash" (increased margin requirements causing cascading stop orders, automated or not). In all of these cases, you've got people (or the automated mechanisms they/their brokers put in place) trying to "save their money" all at once. The paradoxical result is a crash. Of course, most traders (not to mention many investors) won't want to hear this, because it means they shouldn't use so much leverage -- leverage so high that they feel forced to use market stops, portfolio insurance, etc.
CNBC http://www.youtube.com/watch?v=86g4_w4j3jU&feature=related The pit http://www.youtube.com/watch?v=96R05OsJHJ4&feature=related (flash crash day) it was nuts