IB customers lose $88m trading WTI crude

creator said:
This

I’m one of the lucky ones, bought one contract at 0.01 and tried to exit at -0.4 when realized there was no opportunity no put negative price and market price also didn’t work. The price of the contract stayed at zero until today’s morning when they just closed it so it was nice to suddenly get -37k.
I can’t reach them by phone, they don’t answer my tickets and I’ve managed to reach then in chat only one time when the settlement price was being reviewed so that all they answered.

No the price is final and they liquidated all my positions.

Can anybody advise me what to do? Doesn’t look they are eager to reimburse me.
Also, am I supposed to cover my negative balance now? It’s more than I had there
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I call bullshit. IB does not allow opening positions on physical settled positions that close to settlement. Post a screenshot.
 
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4/21/20

May crude oil futures closed yesterday at a negative price: -$37.63 per barrel, down $55.90 from the prior day’s close.

As is well understood, prices fall when supply exceed demand, but to push prices into negative territory means that this excess supply existed in spades! This happened yesterday for the May 2020 crude oil futures contract, in anticipation of the fact that the contract was scheduled to expire the next day. In retrospect, it’s clear that an “excessive” amount of people who had purchased the May contract had no desire to take physical delivery. They had to get out, and they had to get out soon.

Posting of negative prices shouldn’t have happened. Futures are a regulated industry, and one aspect of futures regulation is a feature called position limits. The idea is that the integrity of these markets should be protected from prospective excesses on the part of speculators by constraining the number of futures contracts that those speculators can control. It’s a worthy goal, but that goal wasn’t realized yesterday.

The sharp price drop we saw yesterday reflects the fact that the sizes of the speculative holdings were considerably larger than they should have been allowed to be. Whether that imbalance was due to overly generous speculative position limits or lack of adherence to the limits in place is an open question worthy of further investigation.

Ira Kawaller
718-938-7812
igkawaller@gmail.com
www.derivativeslitigation.com
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Derivatives Litigation Services is dedicated to assisting litigants in cases where derivative contracts are central to the dispute. Please feel free to forward this email to any colleagues or associates who you think might be interested in these services, and thank you for your consideration.
 
This reminded me of myself years ago.

Price went down. I went to buy.
Price went down further. I went to buy thinking it is dirt cheap.
Price went down further. I went to buy more thinking it is really dirt cheap and price would skyrocket soon.
Price went down further. I went to buy more thinking it is really dirt cheap and price would skyrocket soon.
Price went down further. I went to buy more thinking it is really dirt cheap and price would skyrocket soon.
Price went down further. I went to buy more thinking it is really dirt cheap and price would skyrocket soon.



The next day, I had to top up my account.


Last 2 days, those who traded with trend should be earning tons of money.

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ajacobson said:
Posting of negative prices shouldn’t have happened. Futures are a regulated industry, and one aspect of futures regulation is a feature called position limits.

Ira Kawaller
718-938-7812
igkawaller@gmail.com
www.derivativeslitigation.com
mail
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...."shouldn´t, wouldn´t, couldn´t".....this is a "policy goal"...

Position limits are being enforced on a daily basis by market oversight teams at exchange level.

I am sure, Ira, you have made inquiries with the market oversight teams at ICE and CME before reaching out to ET members who "could, should, would" need your help, right?

But we appreciate your effort to sniff out a "market opportunity" for litigators! :sneaky::sneaky::sneaky:
 
Obviously the margin requirement should scale up whenever the position size is large relative to volume.

If you own 1 contract, that's easy to liquidate, so $8000 margin per contract
If you own 1,000,000 contracts, that's hard to liquidate, so maybe $40,000 margin per contract.

IB only takes this risk from the big boys so they should only charge the big boys for it.
 
southall said:
IB are fucking clueless.

Posters noted on the other ET thread that the CL margin was way too low compared to ES months ago.

Push ES to $36,000 margin but have much lower margin on a contract that can lose 300%+ in a day.

Seems like IB also didn't even know about the new negative pricing on the CME.
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Exactly. 8k margin for a product that can sometimes more than 8 points overnight or even intraday isn't much while 36k margin for ES is just dumb, since when has ES ever come remotely close to moving 720 pts in a day? Never?

This just goes to show that IB doesn't know what they are doing, their risk management algos are completely random and that adds a huge layer of risk for their clients.
 
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