You have $4,000 in your account and one YM contract

Discussion in 'Trading' started by Sky123987, Oct 7, 2008.

  1. the mkt opens down 8000 points. Your $4,000 is wiped clean but do you owe anything else?
  2. no because YM trades 24hrs. you will be liquidated overnight :)

    DIA on the other hand and you are screwed
  3. Commision + fees on the close of the transaction, that's it.
  4. technically, i don't think the dow can open down 8000 pts because overnight limit-down on futures and the resulting arb at market open would put an artificial limit on how low the index would open.

    of course, what happens in the minutes after the dow opens is another matter. but, if you had dia and the market quickly fell after open, you'd be immediately liquidated but it's not likely to be at a 8000 pt loss.
  5. What if your short 1 YM contract and the market ends up plummeting this month to like 5000? Will you get paid? If there is a market collapse what will make people honor your trades? Should people even trade?
  6. Lets say an over weekend gap down. YM at $5.00 per tick would be a $40,000 loss and I assume your broker is going to want that. The DIA would be treated as stock and IB's margin requirements is 25% so max loss would be $16,000.
  7. Good question.

    This could bankrupt some brokers if they don't collect from the YM longs. If the broker pulls off a REFCO then you could be holding the bag.
  8. That's a great question. It would depend on the circumstances.

    Heres a real life example:

    9/11/2001 Terrorist Attacks
    The market went limit down when the 2nd plane hit and the guy on CNBC said "This is no accident! We are under attack!!!

    After the 5 min circuit breakers came back online the market collapsed!!!!!!! AND I MEAN IT COLLAPSED!!!!!!!!!

    I was there! I worked on Wall Street. I saw the charts and the quotes on the Big Board!

    They had to close the market because the Dow, S&P 500, NASDAQ, USD Currency Futures went to ZERO!!!! against all other currency pairs. If I remember correctly the British Pound was like $10,000 to 1 US dollar.

    Anyway all the trades were busted as if they did not exist. You can't find any data for 9/11 because it has all been erased!

    Every trade that went on that day has been busted! But I'm here to tell you that it was AMAZING! before they closed the market.

    So to answer your question: It depends on the circumstances. However, if your in a position and the market suddenly gaps on you then your toast! You have to eat it! However, if it goes against you in a positive way then you get to keep the profit or you can threaten to go to arbitration and trust me you will get the $$$. So its a double edge sword. On one hand you eat all loses in your account. On the other hand you get to keep all errors or profits in the account.

    So if the market gaps up or down after your already in it then if its going against your position and you don't have enough margin then you will get a margin call. The Broker (like I used to be back in the day) will call you on the phone and ask you to deposit additional funds same day or else your positions will be liquidated at your expense. If you don't (or can't) pony up then the Broker WILL liquidate you and you will get called for the difference (or sued) or both. Remember its because of these risks that we trade these markets. Risk cuts both ways so we have to manage risk based on our ability to pay. We don't eliminate risk, we manage risk. If these opportunities and risk did not exist there would be no reason to trade these markets.

    Final note: Back in Jan - March 2000 the Fed cut interest rates upteen times in between meetings without any warning. The YM,NQ & ES would go hyperparabolic and gap up 110 points for the ES (Emini S&P 500 Futures), 600 points in both the NQ (Emini Nasdaq 100 Futures) and YM i.e. DJ (back then there was no Mini contract just the BIG Dow Jones Futures Contract).

    Hope this helps?

  9. Surdo


    The opening trade settles in cash that night in your account...think about it, futures are same day settlement.

  10. I guess i'm just getting kinda scared so i should be turning off the tv all together.

    I mean i'm 24 and just got out of college and theres like 0 jobs in Michigan and if the market collapses it looks like i'll be living with my parents again. YAY:mad:

    I've got like 5k cash and 3k out on a credit card with 0% interest (for at least a few more months i think).
    WTF do i do?
    Wha wha right, there are people way worse off.

    Good luck trading everyone!
    #10     Oct 7, 2008