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Oil price negative?


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Oil price negative?

  #91 (permalink)
 
Alaskajeff's Avatar
 Alaskajeff 
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jokertrader View Post
So the 88 million dollar loss IB is gonna take should cover your loss right? I.e IB should cover your loss from below 0 right?

https://www.businesswire.com/news/home/20200421005853/en/Interactive-Brokers-Issues-Statement-Crude-Oil-Contracts


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That article states that IB took a "provisionary loss" under contractual requirements to the clearing firms. That means their loss is temporary.

However, you can bet they are going to go after the clients for the margin calls. I hate to be the bearer of bad news, but all the fine print that nobody reads when you sign up for a brokerage account pretty much says the broker is not liable for anything and all trades are at your own risk. You sign the same agreements to get real time data.

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  #92 (permalink)
 
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While true, IB received ample warning and made it impossible to exit the position due to them ignoring the warning -- or, so it would seem.
Alaskajeff View Post
That article states that IB took a "provisionary loss" under contractual requirements to the clearing firms. That means their loss is temporary.

However, you can bet they are going to go after the clients for the margin calls. I hate to be the bearer of bad news, but all the fine print that nobody reads when you sign up for a brokerage account pretty much says the broker is not liable for anything and all trades are at your own risk. You sign the same agreements to get real time data.

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  #93 (permalink)
 addchild 
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Big Mike View Post
While true, IB received above ample warning and made it impossible to exit the position due to them ignoring the warning -- or, so it would seem.

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I do believe that IB will end up bearing the liability here, but I doubt they are going to do it voluntarily.



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  #94 (permalink)
 
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 SMCJB 
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Probably going to involve a lot of legal fees for everybody involved

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  #95 (permalink)
Artfldgr
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In the time I studied economics at the university that was a scenario that never will and never can happen.

This is not so hard to explain if one realizes that university economics looks at oil as a singular commodity when its the end of a chain.

It goes negative to keep the chain alive.. the processes that go from oil to finished product are a long chain in which several of the steps are hard to restart once stopped... they are continuous and have been for a long time, never actually fully shutting down...

economics in this vein would see an economy that was less about supply chains or this chain, but more like a woven cloth..



meanwhile... Thucydides trap... are we near a verge of war?
given unrestricted warfare documents and other things ignored by our leaders as paranoid
ignoring china regime as classically paranoid as any such has been in history..
are we verging on a weakness which is too good to ignore by them?

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  #96 (permalink)
 
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 shodson 
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Yeah, I couldn't believe it on Monday, I was watching it fall to 0 on IB TWS, the bid/ask too, then when it 0 or just below 0 it just stopped receiving updates and wasn't tradable. So no wonder it dropped so deeply negative so quickly: most retail platforms would allow their customers to trade it, liquidity dried up. Luckily, I was in a spread trade (long May, short June) from last week, but I sold my long May contract on Friday since I didn't want to take the risk of getting stuck in a position I wanted to get out of just before expiration, but kept the June short until this morning, covered at $12, since I was hoping for the two contracts to converge, and they did.


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  #97 (permalink)
 kevinkdog   is a Vendor
 
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SMCJB View Post
When you backetest a system on Tradestation does it break out the trades you couldn't take because they wouldn't let you or does it imply that you could take them?

I can't remember a situation where this sort of thing ever occurred. So in a year, the data will be there, and it will be like you could have traded it, when really you could not.

You'd have to manually exclude those dates from any sort of backtest.

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  #98 (permalink)
 kevinkdog   is a Vendor
 
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Alaskajeff View Post
That article states that IB took a "provisionary loss" under contractual requirements to the clearing firms. That means their loss is temporary.

However, you can bet they are going to go after the clients for the margin calls. I hate to be the bearer of bad news, but all the fine print that nobody reads when you sign up for a brokerage account pretty much says the broker is not liable for anything and all trades are at your own risk. You sign the same agreements to get real time data.

OK, dumb question. Doesn't IB prevent clients from having positions a day or two before expiration? Every broker I have ever had (going back to Lind Waldock) has always told me over and over I had to be out by a certain date, before the last few days.

$88 million loss, assume $40K loss per contract means IB had over 2,000 contracts net long 1 day before expiration date. That seems like a lot.

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  #99 (permalink)
 
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 shodson 
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SMCJB View Post
When you backetest a system on Tradestation does it break out the trades you couldn't take because they wouldn't let you or does it imply that you could take them?

If you're using continuous contracts, at least in Ninjatrader, then the backtest would probably have started using the June contract on the 16th or 17th, so this situation would never show up on a backtest. I'm not sure how Tradestation rolls over their continuous contracts.

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  #100 (permalink)
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shodson View Post
If you're using continuous contracts, at least in Ninjatrader, then the backtest would probably have started using the June contract on the 16th or 17th, so this situation would never show up on a backtest. I'm not sure how Tradestation rolls over their continuous contracts.

I think @SMCJB is talking about the Tradestation edict today (also AMP and a few other brokers) that trading was restricted in June Crude Oil, which is currently the continuous contract front month. So years from now, people will run a continuous contract backtest, and think they could make trades in front month right now, but never could have.

Tradestation rolled sometime last week, so the May negative price action would not show up in any continuous contract.

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