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XIV margin call at Questrade.......any recourse?

  1. Friend of mine went long the XIV with no stop..... Also holds other stocks through same brokerage. Questrade asking for 20K margin call. Total loss on the XIV was +33K....

    Why didn't Questrade sell the position during aftermarket trading, or extended market hours subsequent to that, when the position put the total account into a net deficit?

    I realize it's the traders responsibility, but Questrade (and other brokers), had the opportunity to liquidate XIV positions here on the downswing during aftermarket trading, but chose not too. What's the sense in this?

    Is there anything that can be done similar to the Flash crash "busted trades"? The USDCHF SNB debacle and Forex brokers wiping deficits? Any "re do's" for this one??? Thanks....
     
  2. It is the trader/investors responsibility - not the brokers. If he had no stop and they hold no instruction to act on his behalf then why would they? It is a lawsuit waiting to happen. He will likely lose his entire investment in XIV but should lose no more than that unless he was using additional leverage...so what has resulted in the margin call? How has he gone into a negative deficit?
     
  3. Thanks for the reply. I don't know much about XIV....was unaware it was an unleveraged product..... I'm unsure if his account is in a negative balance, and if so, why. Perhaps my friend can jump in...
     
  4. Does aftermarket trading even come into play on margin calls? If that’s the case it’d be pretty easy to pick some thinly traded market and make some crazy prints and watch the margin calls and liquidation’s come in.

    Think the issue here is that the ETN is liquidating.
     
  5. HOGWASH... STUPID THINK!

    The broker has no financial incentive to "force your liquidation"... There is no "upside" for him, only downside if things "get out of hand".

    A broker's forced liquidation is to protect both itself and you... from running debits you may not be able to honor... and he's forced to make good.
     
  6. And suppose it was all panic driven and back up above $60 the next day and the sold at $30? Had they liquidated under those circumstances, they would almost certainly have breached their fiduciary duty.

    His (your?) recourse was the coupon clipping he believed he was in, and the money he made before it all went pear-shaped. He thought he owned a money printing machine, and discovered the risk of ownership the hard way.

    That said, I do genuinely sympathise...I really don't think XIV is a product that can be represented accurately in disclosures, and it inherently exploits a hard-wired gap in human perception of risk and reward.
     
  7. I was down over 1mil USD intraday and closed that trade with a high 6 digit loss from memory, holding RF futures. Wished someone had told me earlier about the redo, damn ! didn't receive a margin call though, not sure how it ended up for folks with negative account balance.
     
  8. The redo came from firms that were taking the other side of their clients' trades. They couldn't collect anyway so they negated the debt for PR. They didn't have a liability on the otherside to fulfill so they incurred no real loss in the end.
     
  9. Because like most people, Questrade had no idea XIV was entering a termination event. It is not their responsibility to liquidate.
     
  10. I assume he was trading leveraged... which means his initial positions totalled more than he had funds in the account.

    Most brokers that allow this type of trading usually first give out margin calls and depending on the state of the market they might end up liquidating part or all of the position... if one of the products held drop significantly in a short period of time, they might not be able to get in there in time...

    I don't know Questrade... if they need to manually liquidate, they would definitely be too late in the case with XIV. But even if it would be done automatically, that wouldn't mean it's all done in a nice and timely manner.

    All is the client's responsibility....
     
  11. Also... let's assume that Questrade would have liquidated his XIV position somewhere at -70%...

    What if it would rebound after that? He would probably be complaining that they liquidated and that they shouldn't have done that...

    Moral of the story... don't blame others for your own f#$k-ups....
     
  12. Do you really think there was a viable market after hrs for a security that was liquidating by prospectus ? Who possibly would be on the other side of that trade ?
     
  13. Bitcoin HODL-ers assume there's a 24/7 market in everything... it wouldn't surprise me if OP's friend is one of them.
     
  14. Well, there is a 24/7 market for most of life's desires, but you will pay dearly for them.
     
  15. Use IB, which has auto liquidation so at least it tries to you keep you in the black, instead of going into debt and owing them money for a margin call. They're not doing this for you, but to protect themselves, but it's one of those win-win situations that at least it works in the interest of both parties.

    Other brokers offer the margin call model, no.1 because of technology. Auto-liquidate requires an automated system in place and robust risk management strategy. Many brokers are old school. No.2 margin calls offer clients an option to stay in the market. You might only have $10K in one broker, but it doesn't mean that's all you have. If something tanks that you bought on margin, maybe you want to keep the position. So margin call is option to stay in the game rather than force a loss and a tax event.

    In the case with IB, I think they require 100% margin on the VIX products. So between that and autoliquidate, it would have been unlikely for margin debt in the event trade went against you like that.
     
  16. Turns out my friend was leveraged at 2:1 on the trade. Hence the negative account balance. Unsure if my friend will post.

    Thanks for the replies.
     

  17. Clearly, there was after hours trading on the XIV with significant volume. It didn't "gap" down.... Call me crazy, but I doubt brokers are patting themselves on the back right now for holding 7 figure losses on their clients XIV trades because the market 'may have come back' and auto-liquidating to protect client accounts would have 'angered some clients'....

    The VIX doubled during regular market hours Monday, causing obvious havoc for a product seeking to track its inverse return. Though, the XIV dropped just 14 percent during regular trading.

    But then after hours trading began and the security, popular with hedge funds betting on an ever-placid market, was off by 80 percent in extended trading.
    https://www.cnbc.com/2018/02/05/xiv...linked-to-volatility-plummets-80-percent.html

    [​IMG]
     
  18. Fault and recourse are two very different things. Lot's of investors who were at fault still had recourse after the 87 crash. Having said that Questrade is a Canadian house and I have no sense of Canadian securities regs. Rest assured that there will be a ton of litigation arising from the events of the last few days. Doesn't mean that's right - it's just the state of the industry. In the short run he'll need to resolve his short term account issues. Recourse will come later as these events wind their way through the system.
    This is when you want to review all of his documentation and store it. Events like this showcase why you always want to be factual on your new account form.


    No one is ever suitable to lose 100% of their net worth.
     
  19. Not positive, but I'm not sure IB would auto liquidate in afterhours trading (which is when XIV crashed). The 100% margin on VIX products would have helped though.
     
  20. XIV is not marginable at IB, so yeah even if it went to zero, you're not gonna be in debt to them as you can only trade what you have in equity. XIV gapped down, but would not have mattered for 100% margin stocks as you're trading your own money like a cash account.

    A person could have other marginable positions on, and those can fall along with the market, but IB liquidates once it hits a buffer. Someone with knowledge can chime in, I think throughout it's history there were maybe only a few times where a margin call is made, right? It shows their technology and risk management works in protecting themselves, but also IMO the trader. Lose everything, sure, but few want to go into debt.
     
  21. I remember this happening in past. It was posted on ET. You never guess what the account holder posted....
    "Why did they close my position, they could have let it go a bit further (on who's financial risk?) as it was clear the market would recover. My position go out of the loss later and so it was not necessary to close it. "
    ROFLMAO.
    The traders opens and closes the trades for his own financial risk. Nobody else has a permission to intervene. The only exception is an account that is wiped out.
     
  22. Hey guys, I'm Hotcakes genius friend that held XIV overnight. Thanks for all your input. I couldn't feel any stupider at the moment and know I f'd up. But I don't think it had to go down that drastically. Questrade raised my margin call to 100% right after and took 30k in other stocks. I know there are people out there who lost a lot more but I'd still like to see if there is anything one can do to follow this through. All of the people I have talked to are from the US and have filled in the SEC complaint form as a starting place. Do we have a similar process in Canada?

    I'm also wondering what you think I should do with the xiv shares I got stuck holding. If there is any case or class action is it better to hold them and have CS liquidate them instead of dumping them on my own?

    Thanks guys, and yes I know I'm to blame for holding over night and yes I know it is dangerous to pick up pennies in front of a steam roller. But I've lost everything so I need to try whatever I can.

    Cheers,Ed.
     
  23. Who offered you leverage on this product? That just seems absurd...you went from needing a 80% rally in the VIX to blow out to a 40% rally.

    Anyway, I think if you want to follow this up in a serious manner you should seek professional legal advice. Maybe you can get some sort of settlement from CS but I would say that was it. You will get nothing from Questrade as they seem to just be a broker and I'm sure you signed all those forms confirming you understand the risks involved in trading with leverage etc. You'll have to chalk this up to a serious life lesson I think. Again only a lawyer will really be able to say for sure.
     
  24. Thanks Spread..
    What type of Lawyer would be best for this situation. Not that I have any cash left to retain one but it would be good to at least talk to someone.
     
  25. Not sure how it works with other brokers. Maybe some allow margining on the VIX ETPs. Interestingly, if I recall correctly, I think even IB used to allow 50% or 75% margining on UVXY/SVXY/etc until they made it 100% margin a while ago. I don't think they will ever allow margining on those products again, ever. I can see some brokers still allowing 50% margin on it.
     
  26. There were some buyers all the way down, even though it is obvious sellers dominated buyers most of the time (1-min bars). There was even a brief mini rally @ 3:33pm CT. There was an opportunity to save a 94% loss +/-.
    2-5-18 XIV 1min.PNG
     
  27. It went down that drastically by design. If you cannot bring yourself to understand why the price movement was justified, you shouldn't be trading this product. Even though it sucks that this happened, the best advice is this: close your XIV position and get on with your life. Once you close it out, hopefully you'll feel better. I know I feel better after closing out a big losing position (it clears the mind). Good luck.
     
  28. IB and TOS/TD both required 100% margin on XIV on Monday during regular trading hours (and after hrs). I've PM on both accounts but even with portfolio margin you didn't get any leverage - which to be honest saved my butt/accounts. Still lost a small 6figure amount but it could have been much worse.
     
  29. Thanks sprstpd, my friend suggested the same. I'm starting to agree too. Chasing this thing legally is starting to make me more insane than loosing the actual cash. Probably best to just move forward and build up again slowly and understand first, in detail, what instruments I'm playing with.
     
  30. I mean if you really wanted to play the same game, you can just sell your XIV position and move into SVXY which will still be trading after XIV terminates. Or you can create your own XIV like position through options. But usually after getting burned by something, it is best to stay away for awhile, let the dust settle, and think about what you want to do next.
     
  31. There was no opportunity. Even if there was a small after hr bid, do you think your theoretical offer was first in line ?? As other have said, move on.
     
  32. I have not traded stocks, ETFs/ETNs in years, but years ago I did trade after-hours earnings, announcements, indictments, etc.

    It is possible to get filled on your limit orders. Only limit orders are accepted, so it only first come-first served at that price. You anticipate where the price will be, not where it is currently.

    For example, on 10-15-14: NFLX dropped over $123 at one point on an earnings miss. Some traders specialize in trading those fast, crazy, big moves after hours.

    Anyway, good luck in your trading.