What is the maximum gap down at open ?

[Halal Burger]

Quote from Ghost of Cutten:

Do you have a source for that? I hadn't heard there was such a big gap, so I'd be interested to confirm it.

Just has a look and it was only 66%

13th October close: 2771.16
14th October open: 950.98

 

[The Big D]

Quote from monkeyc:

ES has gone limit-down overnight twice since 2007, and both times SPX opened around 5% down. I would like to know what exactly could cause SPX to open outside the overnight limit range for ES? How could SPX and ES become disjoint?

My understanding, and someone please correct me if I'm wrong, is that all the US index futures and exchanges have in essence the same circuit breaker policy - a one hour limit down after -10% a 2 hour after -20%, and a forced close after 30% with a 5% overnight limit for the futures.

The thing is, none of that allows you to in any way cap your losses. There's no guarantee (as any commodity trader will tell you) that you won't have multiple limit down sessions in a row where the market simply open ask-limit down and sits there with zero volume or closes up shop for the session (depending on exchange policy). So in effect, your real risk is -100%.

A fact known to any decent commodities futures trader is that limits do NOT decrease risk, they increase it by preventing the execution of stops. If you think slippage in a crashing market is bad, wait until you see slippage in a closed market. Limits favor institutional investors with the bankroll to fade the risk. The tighter the limits, the more so this is true.

 

[nazzdack]

Quote from The Big D:
.....circuit breaker policy - a one hour limit down after -10% a 2 hour after -20%, and a forced close after 30% with a 5% overnight limit for the futures.

1) That's better than a single, fixed, daily price limit.
2) If you can keep your wits and feel comfortable, you can trade options that are far enough out-of-the-money where those premiums themselves haven't locked at their limit and attempt to trade your way into or out of a market.

 

[monkeyc]

Quote from lescor:

ES went limit up on the morning the gov't banned the short selling of financial stocks in september '08. SPY was trading pre market though, up more than 5%. Don't think just because 5% is the limit that that's the most you can lose on an overnight gap.

But what was the SPX at open? With ES closed for trading and SPY still trading, there is no arbitrage going on. So it's not a true market scenario with normal price discovery mechanisms in place

 

[monkeyc]

Quote from Ghost of Cutten:

WWI closed trading for a long time and the market fell 25% on the day when trading resumed, but I don't know how big the gap down was - probably quite large. The October 1987 crash caused a 50% overnight gap down on several markets like Japan, Hong Kong.

how many of those markets had futures overnight trade limits?

 

[Ghost of Cutten]

Quote from makloda:

The HSI (index) gapped down 25% on October 26th.

But the index was not the market price (due to trading and reporting delays, many stocks not even opening for trading etc). The market price (i.e. the price you could actually buy or sell at) was the index futures, which gapped down a lot more.

 

[Ghost of Cutten]

Quote from Halal Burger:

Just has a look and it was only 66%

13th October close: 2771.16
14th October open: 950.98

Nice. And that's in local currency, imagine the gap in dollar or euro terms