do what u think u should do.
do social distancing.
anyway the whole world is doing social distancing.
Found that dude trading CL with an IB account
- Thread starter DarthSidious
- Start date
do what u think u should do.
do social distancing.
anyway the whole world is doing social distancing.
1MM to day trade? Are you so rich and out of touch you don't realize how big a number that is? That's almost as absurd as saying let's raise the age of consent to 50. No thanks.
right.
margin requirement should be reduced, ie leverage should be increased.
now IB has to increase margin requirement all because of Shah the inexperienced & greedy day trader (and also IB lousy system)
1MM to day trade? Are you so rich and out of touch you don't realize how big a number that is? That's almost as absurd as saying let's raise the age of consent to 50. No thanks.
I typed an extra M.
1,000,000 should be the minimum required capital to daytrade, among having at least a few series exams. To accomplish this abolish the sponsorship requirement for exams so that daytraders who wish to trade can get education demonstrating they understand the risk.
Day trading is gambling. There is no edge in day trading. If there is a population of 3M day traders, 1/10 of 1% of them probably understand enough about digital signal processing to properly recover information from a high frequency time series such as the 1m chart. To all the people who think they do fine. In a population of 3M traders there will be winners. Entire fields of science are dedicated to learning as much as we can about these time series for radio and medicine. Some piker with a few lines on a chart has zero idea what they are doing.
Have you ever sat down and asked yourself why day trading is even allowed? Casinos have to have regulated odds. For example, you can theoretically know to the Nth decimal place your odds of hitting 00 on roulette (the odds of you hitting 00 on roulette are still better than discovering a consistent edge in the high frequency time frames on a future). With trading you can't. This makes it hard for the broker to hedge against risk such as the one in OP's post.
So what are the options?
1. Allow day trading and require 1/2 notional for any contract up front and the other 1/2 in escrow. For well capitalized traders (1M+) these can be reduced some fractional percentage.
2. Ban day trading outrights (spreads with SPAN margining are fine since spreads negate risk considerably). Raise margin on everything across the board.
Imagine you're a broker. I, a college kid with $3000 to my name, say "I would like to buy 1 CL contract". You, the broker, would be insane to say "yeah sure kid no problem". I will come to you and say "but I am providing liquidity by getting in and out of trades quickly" to which you laugh at me and point to a corner office labeled "citadel" and another labeled "jane street". Then, you walk me over to the pit and tell me if I want to day trade I can buy a seat. Don't like the trading analogy? How about a house. Do mortgage brokers allow 2.5% down for people with bad credit and no income? Not anymore. Mortgage brokers were gambling with the same risks as day traders in 2008 (also funded by the taxpayer...funny enough). We saw how well that worked out. Now you'd be lucky to get a 5% PMI as a well off silicon valley software engineer with an 800 credit score. Margins necessarily have to increase for people with poor credit scores (i.e. day traders) in order to compensate the broker fairly for their risk.
The internet has brought unprecedented risk to people who are not involved in day trading. Flash crashes are becoming more frequent, for example. Why should I, a guy who holds a spread and/or underlying for months at a time, be put at unnecessary risk because you have a gambling problem? I shouldn't. The brokers are protected by taxpayer bailouts. Next time you're out - thank a taxpayer for funding your addiction to losing money.
*I agree and speculators who understand CL and the liquidity issues arising before expiration were out at least 3 days before expiration.
*ICE WTI did exactly what the contract specs said it is supposed to do. If you do not understand the product you probably should not comment on it and definitely should not be trading it. Certain physical grades of oil had been trading negative prior to April 20th.
*Anyone who was long CL at expiration entered a contract to take delivery. My guess is we will see some stories in the next couple weeks about how some uninformed "trader" can't take delivery.
You realize CME issued that statement because every single oil analyst was publishing research reports about the possibility of negative prices? It was the talk of the industry well before CME chimed in. Goldman was writing about negative prices in March, and even CNBC had articles on potential negative prices before CME had issued any notices. I assume the analysts and media are all to blame too -- anyone else we should blame?
Agreed. I would've looked at those contracts, and thought "Holy shit, wtf? I wonder how I could trade that? I don't know enough about oil and the contracts are too big to play with. I'd need at least a week to feel comfortable getting into that shit. Gonna sit this apparently amazing opp out."
And I agree - +1 for IB . They didn't squawk are complain. They said, 'it's our fault,' even though the outcome would have been the same if their software had printed negative (although the guy might not have entered the .01 trade, cause it was <0 then, I think.)
Too many bitch about every thing, but the markets are soooo complex, that managing every black swan - and this fits that pun intended bill - is impossible. Can the naysayers build out a platform with the breadth of IB while preventing all black swan hiccups. yeah - thought not.
MM is commonly used on this forum to mean million. I was not assuming you meant billion.
Have you ever sat down and asked yourself why any kind of trading is allowed? Why private property is allowed? This is capitalism baby! Who are you to tell me what I can buy or sell, or how fast I can do it? If 99% of traders have no edge, then their capital will finds its way to the 1% who do.
Nonsense. IB just fucked up their risk controls because they didn't understand the price could go negative. None of this has anything to do with day trading or odds making.
Now this just sounds like whining. You have your little thing and anyone you perceive as putting it at risk, well they should just be banned. You sound a bit like people who rail against HFT, but with you it's "day traders".
If you are so smart and responsible (unlike those pleb day traders with poor credit scores) why would you be at any risk from flash crashes. You aren't over-leveraged are you? If you are concerned about broker risk then just start your own broker. This should be no problem for someone as well capitalized as yourself.
And to think IB was ranked #10 out of 40 FCMs in 2017, and #12 in 2020:
https://www.managedfuturesinvesting.com/wp-content/uploads/2018/02/2017-Top-FCMs.png
https://www.managedfuturesinvesting.com/wp-content/uploads/2020/01/2020-Top-FCMs.png
Perhaps the criteria needs to be changed....
https://www.managedfuturesinvesting.com/wp-content/uploads/2018/02/2017-Top-FCMs.png
https://www.managedfuturesinvesting.com/wp-content/uploads/2020/01/2020-Top-FCMs.png
Perhaps the criteria needs to be changed....
IB was told by CME five days before that they should be prepared as CME decided to allow negative pricing. Five days.
The whole world went crazy for two years trying to fix the Y2K issue to allow for four digit years in computer programs. It hardly seems reasonable to the exchange to decide brokers would be able to handle this.
However, if I were in a position to decide what to do in this case, I would have had IB set crude to liquidate only. Also, probably would be wise for the exchange to have $0 as an absolute lock limit at which trade halts and and can only resume on an uptick.
Another solution would be futures contracts that allow trading in storage capacity.
Also, let's not consider these traders as victims. They chose to take the risk and they did so out of greed and hubris thinking they knew something they had no business assuming they knew (that their risk was limited to $0). I don't regularly trade crude but I got the CME notice and I read it and there was no way I'd have tried a long once CL broke it's 1998 bear market low until it once again settled above that level (Around $10.65/barrel, I believe).
Silly traders. Silly exchanges. And in this case, a real "do nothing" error on IB's part. But there is plenty of blame and it should be shared accordingly.
MattZ
Sponsor
You need to separate the concept of "broker" and CME "data providers".