Negative numbers

So the Day trader Shah still lost his whole $77k in his account correct? Regardless of the software error when it went negative he still lost his whole $77k.
 
Yeah, that’s what I understood. My question is - if IB’s margin/risk software worked properly, would it allow him to enter into these positions in the first place?
 
I'm sure no different than buying negative bonds . So if you bought at -$5.00 a barrel and it went to -$10 a barrel and you sold you lost $5.00 a barrel.
 
,,He didn’t sleep for three nights after getting the $9 million margin call, he said.''


Welcome to the Arena.

 
hafez50 said:
So the Day trader Shah still lost his whole $77k in his account correct? Regardless of the software error when it went negative he still lost his whole $77k.
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No, IBKR compensates the difference from 0.00 to settlement price - 37.63, as he was locked into his position below 0.01.
According to my calculation he will thus only lose around 4k.

"Interactive Brokers foresees refunding $18,815 for the Nymex ones and $37,630 for ICE’s, according to a spokesman"

Only forgiving negative balances would still lead to a number of potential lawsuits. Why would you compensate Shah with almost the entire amount and others who didn't go negative but were affected the very same way (like me) not...

However he might still have lost more considering liquidations of other positions. I guess, given his "style" of trading he might also was long other stuff that at least in part went up big in the meantime - maybe TSLA, NQ, BITCOIN, GAS, USO to name a few.
So at least missed profits... Which IBKR will and should not compensate.
 
Tps said:
No, IBKR compensates the difference from 0.00 to settlement price - 37.63, as he was locked into his position below 0.01.
According to my calculation he will thus only lose around 4k.
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Based on the part of the article below he lost at least close to 30K but more likely nearly all of his balance based on the way he was trading.

Trade 1: long 5 lot at 3.30 = -16,650
Trade 2: long 21 between 3.30 and 0.50.
Guesstimate an average of 1.50 = -31,500
Trade 3: long 212 at 0.01 = -2,120

Based on those figures he lost around 50k when you add fees in, but I am willing to be he bought 212 at 0.01 because he was going all in with his last 6,xxx of equity.


"The day trader in Mississauga, Canada, bought his first five contracts for $3.30 each at 1:19 p.m. on that eventful Monday. Over the next 40 minutes or so he bought 21 more, the last for 50 cents. He tried to put an order in for a negative price, but the Interactive Brokers system rejected it, so he became more convinced that it wasn’t possible for oil to go below zero. At 2:11 p.m., he placed that dream-turned-nightmare trade at a penny."
 
abc1234 said:
Based on the part of the article below he lost at least close to 30K but more likely nearly all of his balance based on the way he was trading.

Trade 1: long 5 lot at 3.30 = -16,650
Trade 2: long 21 between 3.30 and 0.50.
Guesstimate an average of 1.50 = -31,500
Trade 3: long 212 at 0.01 = -2,120

Based on those figures he lost around 50k when you add fees in, but I am willing to be he bought 212 at 0.01 because he was going all in with his last 6,xxx of equity.


"The day trader in Mississauga, Canada, bought his first five contracts for $3.30 each at 1:19 p.m. on that eventful Monday. Over the next 40 minutes or so he bought 21 more, the last for 50 cents. He tried to put an order in for a negative price, but the Interactive Brokers system rejected it, so he became more convinced that it wasn’t possible for oil to go below zero. At 2:11 p.m., he placed that dream-turned-nightmare trade at a penny."
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You are right, i thought it was only 1 at 3.3 and 0.5.
 
Genevian Speculator said:
IB bailed him out with their funds. I have deep respect for IB. I'd never expect that from another firm. They are men of honor in my opinion. Greatness is hard to find these days.
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I agree with you, many other firms would probably just reject any false doing and may settle with customers individualy or even go to court.

Hats off to IBKR to just admit they messed up. But i still think they did consider other options as well but after a thorough review just had to realize that other options would hurt their business and/or lead to the same outcome in court anyway. Even if they won their case they would probably only be able to collect a small fraction of the total loss, who knows, maybe there is also a 50MM guy...

This way they avoid a long legal battle and possibly additional regulation to protect investors hurting their business.
I think it also has to do with their owner structure, Peterffy basically can decide on his own.

An example is the CHF disaster after SNB gave up the floor to EUR. Many FX Shops had to handle customers with negative balances. Some just made them whole others went to court to collect. Some won (but still didnt get much out of their customers), some lost...
But as a result tight regulation was put into law, hurting their Business in the long term...
For instance limits on leverage, negative balance protections, and other things.
 
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