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Price Limits and if I have the correct Amounts " Per " MAX move ??


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Price Limits and if I have the correct Amounts " Per " MAX move ??

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  #1 (permalink)
md1933
memphis
 
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I want to please make sure that I have the right Calculations for each of the Attached Markets

Does this mean, that in a WORST CASE SCENARIO , that if a Limit UP/DOWN day occurs, and it moves against me , that the Amount Listed, is What I could stand to Lose, in terms of Real Dollars ?

If so , this is scary ......... As SoyBeans has a MAX Limit move of $5,000

Am I understanding the way in which Limit Up/Down moves are Calculated, and in how they work ?


Thanks so much for the help

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  #3 (permalink)
 myrrdin 
Linz Austria
 
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md1933 View Post
I want to please make sure that I have the right Calculations for each of the Attached Markets

Does this mean, that in a WORST CASE SCENARIO , that if a Limit UP/DOWN day occurs, and it moves against me , that the Amount Listed, is What I could stand to Lose, in terms of Real Dollars ?

If so , this is scary ......... As SoyBeans has a MAX Limit move of $5,000

Am I understanding the way in which Limit Up/Down moves are Calculated, and in how they work ?


Thanks so much for the help

You find limits on the CME site:

Price Limit Update

$ 0.03 for hogs and cattle corresponds to $1200 in your account. Before starting to trade please make sure you know what a change of the commoditiy price means for your account.

If you are long a commodity and there is a limit-up move, you will not be able to sell the commoditiy at this price. There is no seller. And there might be a limit-up move on the next day. And the next. This kind of things can happen in case of a report showing an unexpected development of S&D or in case of a severe change in weather or in case of a nation-wide sudden outbreak of a desease.

If a move of $5000 move scares you your account might be too small to trade futures.

Best regards, Myrrdin

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  #4 (permalink)
md1933
memphis
 
Posts: 74 since May 2016
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myrrdin ,

Thank you for your reply

So a .01 ( it's " 1 " Point value = $400 ........ The Amount I see on all of the Commodity and Futures websites


Question Please:
If I'm Long and a Limit UP move occurs ( I am guessing that this means that this particular Market is Moving Higher in a Fast move ).
So if I was Long , and this happened , would I make a Nice size Profit , come the day that the Limit Up move is removed, and I can Exit my Trade at this Point ?

Thanks so much for your help

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  #5 (permalink)
 myrrdin 
Linz Austria
 
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md1933 View Post


Question Please:
If I'm Long and a Limit UP move occurs ( I am guessing that this means that this particular Market is Moving Higher in a Fast move ).
So if I was Long , and this happened , would I make a Nice size Profit , come the day that the Limit Up move is removed, and I can Exit my Trade at this Point ?

During a limit-up move you always can liquidate your long position. But usually you will wait until the move up has ended. At this time you will be able to exit your position. Exception: There is a limit-down move directly following the limit-up move. But this is a very rare case.

Best regards, Myrrdin

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  #6 (permalink)
md1933
memphis
 
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Thank you myrrdin for your time and help , I really appreciate it

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  #7 (permalink)
md1933
memphis
 
Posts: 74 since May 2016
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myrrdin,

I Understand now, with a lot more confidence, about Limit Moves, and what they " Actually " mean

QUESTIONS please.....

1. So if You are in a Trade, and the Limit move happens in the Direction that you hold a Position..... So say you're Long Soybeans and Soybeans has a Limit Up day of $1 move ...... When the Limit is " Lifted : , does this mean that there is a High likeliehood that you Could make a Profit ( on a Per ....1 contract basis ) , upwards of around a $5,000 profit ?

2. I always place a Stop EVERY time I enter a trade.
So for safety reasons, I.E. to protect yourself from suffering a Big Loss if a Limit move against you was to occur ..... What is the Best Kind of Stop to Always place on your trades ...... A Market " Stop " order ?

3. I have heard of Hedging your Position with Options .
If this was a method I wanted to use to Hegdge my Position with , How would this work ?

Say I'm long 1 contract on Corn
Do I then buy 1 Lot of the ATM Puts on Corn ...... with 60 - 90 days ( Minimum ) till Expiration ?

Thanks so much for any and all help and discussion.
This has been very Informative, and I appreciate

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  #8 (permalink)
 myrrdin 
Linz Austria
 
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md1933 View Post
myrrdin,

I Understand now, with a lot more confidence, about Limit Moves, and what they " Actually " mean

QUESTIONS please.....

1. So if You are in a Trade, and the Limit move happens in the Direction that you hold a Position..... So say you're Long Soybeans and Soybeans has a Limit Up day of $1 move ...... When the Limit is " Lifted : , does this mean that there is a High likeliehood that you Could make a Profit ( on a Per ....1 contract basis ) , upwards of around a $5,000 profit ?

2. I always place a Stop EVERY time I enter a trade.
So for safety reasons, I.E. to protect yourself from suffering a Big Loss if a Limit move against you was to occur ..... What is the Best Kind of Stop to Always place on your trades ...... A Market " Stop " order ?

3. I have heard of Hedging your Position with Options .
If this was a method I wanted to use to Hegdge my Position with , How would this work ?

Say I'm long 1 contract on Corn
Do I then buy 1 Lot of the ATM Puts on Corn ...... with 60 - 90 days ( Minimum ) till Expiration ?

Thanks so much for any and all help and discussion.
This has been very Informative, and I appreciate

1. No. Limit-up simply means, that the daily price limit for a commoditiy has been reached, and that a trade at a higher price is not possible on this day. Your profit equals the difference between your sell and your buy prices.

2. Yes, to protect a position I use a stop market order. But be aware that this stop market order is no guarantee that you buy back your position at the price you expect. Example: Dryness in the areas were they grow corn. You buy a corn future as you expect rising corn price. During weekend unexpected rain helps the crop - on Monday the futures open limit down. There is no trade, and your stop loss will not be filled this day.

3. Yes, you could buy corn puts to protect your position. I usually chose the same time until expiration than for the Futures. But be aware that in case the future price does not move you will make no profit with the future, and loose money with the put.

There is a number of books which give answers to your questions. The most recent one that comes to my mind is the new book written by Carley Garner. It costs only about $40, and certainly would help you understanding future trading.

Best regards, Myrrdin

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  #9 (permalink)
wintergasp
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myrrdin View Post
During a limit-up move you always can liquidate your long position. But usually you will wait until the move up has ended. At this time you will be able to exit your position. Exception: There is a limit-down move directly following the limit-up move. But this is a very rare case.

Best regards, Myrrdin

Myrrdin is incorrect. When you are long and the market limits up, you will ALWAYS be able to Sell on the future. That is because you will get arbitraged by option traders who will sell at a synthetic price much higher than the future price and buy back from you (hence you're selling your position) at the limit up price.

If you are Long and the market limits DOWN... then you're f#cked. But again, you can trade it synthetically with options so the limit-up / limit-down thing is just bullshit.

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  #10 (permalink)
 myrrdin 
Linz Austria
 
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wintergasp View Post
Myrrdin is incorrect. When you are long and the market limits up, you will ALWAYS be able to Sell on the future.

I wrote: "During a limit-up move you always can liquidate your long position." That is exactly what you describe.

Please clarify what is incorrect regarding my statement.

Best regards, Myrrdin

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Last Updated on October 1, 2016


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