Whats the difference between oil going from 10 to 2 or if it went 2 to -6. Same thing on a tick basis right? Doesn't the position get auto liquidated once your account balance falls a certain amount?? I don't get it.
In theory that is correct. However, in a very fast market, and/or other rare times such as limit moves, even the best systems will not go problem-free or unscathed. It is the traders responsibility to understand an open trade. Compliance departments and liquidation features should be considered last resorts. In all cases, it is the trader who assumes all monetary risks regarding open trades.
The old line if you owe the bank 100million and cant pay, it becomes the banks problem. Well this is IB's problem. But as its only $88 mill, its not really a big problem.
Hi, That truly sucks, and as per Murphy's Law, it happened at the worst possible time. I was able to execute fine through IB. I just traded one contract, as it is scary, but I got a nice fill, and a nice exit for 5+ points in 31 minutes.
July CL contract is not a bad short, it's falling more than June is right now, the gap between the 2 is narrowing.
my situation with them is worse, on the day the contract went negative, along many of the positions i had in various instruments of crude oil i had contracts in qmk20,, 1. they didnt mention ever it would go to negative or could go to negative. Fine as one person says below its the traders responsibility, also according to cme writing its if the contract settles/closes between 8-11 the negative will be allowed but lets take things in chronological order 2. they sent me an email few days ago reminding me clk20 expires Monday or i guess last day to trade it is Monday 4pm cst, one would assume qmk20 is the same, no email was sent regarding that 3. the minute price dipped to negative i google what the fuck is going on and saw that they said they gonna allow it to go negative, seeing that i immediately went to liquidate the position since the shit became like bottomless fries at Red Robin. One would say that the worse case scenario is zero, new rules new changes, trader should know, fine, we go along, but when i went to liquidate, the platform wouldn't let me even push the order through saying “futures prices must have a positive order number” i start wondering if the whole shit is an error, i try offsetting it in clk20 contracts, same error. I called them while on hold 53 minutes and at around 2 something the position got liquidated at negative 37 something whatever the settlement price was, Iam over the phone on hold still. Hour and half they finally answer needed to be transferred to futures another 10 minutes hold. I try my best to stay calm and tell him What happened at first he starts his typical job mind Responses, oh cme this n that we just the broker, what about email letting clients know or heads up? Oh iam not sure,, ok how come i got an email that clk20 last time/day to trade it is 4pm Monday and no email qm and most importantly why did i get liquidated before the last time/day iam allowed to trade it till, he said let me get back to you on this. I finally brought up The key point that no matter what responsibilities i have you the broker have the responsibility that i can get in and out of my position and here neither your platform supported me or your delayed response. The guy seemed to understand and realize its a problem And was heavily pressured, i told him apprently You need time to figure it out and i understand since all of us are seeing this for the first time ever. He said yes and well call you back, iam waiting for them still. ind you the account never hit a margin or was even close to it. And was ok after the day is over my other crude positions were fine also no issues there In other contracts and hedges and options, none of those got liquidated I think CME here messed up big fucking time, they allowed prices to go negative so that markets continue to function “as normal” how is a market normal when its in negative prices ? Whats next? Bankrupt stocks trading negative ? The ones less bankrupt trade at negative 5 dollars versus the ones more bankrupt at negative 10 dollars?? Whats in cme advantage is clearly unless iam wrong more trading more volume more fees,, but in the long run or short run who if any one in the world is getting anything out of crude going negative, even shorts, because now its not about money its about the integrity of the markets, if an investor and particularly the big funds who usually trade based on notional value of the underlying can not calculate notional value then what to do? Whats the notional value of 1 crude contract at 20 bucks if it can go negative ? And for the small trader now your forced to use margins so even if you have 20k to cover whole contract now your not safe, tell me if iam not seeing it but who and whats the advantage if any?? Personally i think they scared the shit out of everyone everyone everyone no exception and less and less people will touch futures, if you got even funds like uso and OIL i believe the second one shutting down and or worried about doing so that tells you what they did is affecting big boys and small ones just as much. Even worse supposedly USO is the biggest holder of contracts what if they have to liquidate?? what now did CME achieve? besides know out of of their biggest trader? What about ripple effects? Tell me how in any way can negative prices help any one or benefit any one at ALL?? heck if oil given free they can make a post about it and have those 1% that settle physically deal directly, isnt 99 percent of all contracts are rolled?? that tells you they are traders and as traders who simply look at margin req and say i am out 10 points up or 10 points down then to them it really doesn't make a difference if the price is -40 or +40 cuz those people are in based on margin req and points change, thus the negative adds no value to the 99% what soever The difference is you cant calculate your notional value any more when you trade at 10 your value is the contract size times price and a 5% move for example would shake your positions notional times 5% times amount of contracts,, but now that its bottomless That becomes not doable. Tell me, If someone has 1 million lets say and wants to put 10% of that in Crude, how do you calculate that now that it can go negative? how much is 10 percent? how is 10 percent to be calculated? and please dont tell me a stop loss at 0. Were talking about calculatin the value of the contract/investment size in dollar figures agreed, assume monetary risks, so whats the risk when you cant calculate the value of the position?? You also use the word trader, cme stands for chicago merc exchange but one is to ask whats the exchange if the price is negative? Really? Are you exchanging anything ? Money for crude ? Not really, producers are GIVING you crude and money, its not so much of an exchange, i think in due time this will go down in history as a major mistake on cmes end,,maybe the name will change to Chicago merc and giving, CMG,, i know i am chasing my broker as far as i need for this and for not being able to get out of my position, whether short or long one should be able to get out whenever they want. The psychological pressure on both sides of the equation long/short is beyond any monetary compensation if you cant get out of your position and or go through such volatility unnotified in advance, as one said here some Jacked margin to the moon, why didn't all the brokers do it when cme announced it can go negative, didn't that in itself increase the size of the contract?? Any advise input or guidance is appreciated if this thing doesn't get resolved with them directly on what i should do @bone @schizo
I wouldn't be surprised that brokers are doing that restricting trading to such instruments. I would do the same if i was them, after all it only adds significantly more risk to them like iB losing 88 million and for what they gonna keep such contracts trade able for traders?? diversity?? i doubt its worth the risk. Probably crude oil will become in the future a contract like those soybeans and meats, hardly traded, no so liquid any more and only played by the very few who MUST play it, not necessarily the big or the small but by those who have a reason why they got to be involved in it,
Allowing the contract to trade negative is pretty crazy. It definitely throws off managing your risks as a trader. Basically being long a contract is no different to being short in terms of risk. You have unlimited loss potential with either case. Conventionally with equity trading, people think of long positions as limited risk while short positions carry unlimited risk. Not the case with commodity futures I guess. But the way people leverage with futures, very few people have enough notional value in NAV to cover their long futures anyway. So in those situations, whether you are long or short, you basically always risk getting wiped out long or short if you are unhedged. In a negative futures price scenario, the producer or whoever is selling their stored oil is both giving you free oil and paying you at the same time? Seems crazy. But I suppose that's possible. Perhaps the storage costs are way too high. Maybe it's as if they are fire selling and cutting losses and just offloading their stuff to anyone who will take it, otherwise holding it will cost them more. It's like those situations where people sell their time share vacation properties for $1 or even hand it out for free, because long term annual maintenance cost is leading them to financial ruin. I suppose brokers may not have to treat commodity futures any differently going forward. They always allowed people to short futures which carries unlimited risk. It's really no different for long positions with negative prices allowed. Just apply the same rules for long as they do for short. Basically playing around with margin requirements and autoliquidation scenarios to manage client risk. Seems like hedging with futures options is a must. Still not fool proof either.
It is maybe hard to swallow, but futures market are not made for the trader. You, as a trader, take the risk off from supplier and vendor what happens after their agreement. If suddenly something happens like in oil monday, you cannot blame a broker or an exchange. Demand disappeared and there is a cost to store it, that is why price went negative big time. You also see sometimes move in the other direction in the future markets, like cotton in 2011. (Way more demand and suply disappeared in the last day's of a contract, because one big name had to own all and took delivery) But is not okay for a broker to not let you get out, if there is bid and ask at the moment you want to get out.