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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,059 since Dec 2013
Thanks Given: 4,410
Thanks Received: 10,226
I think this was a bigger issue years ago when it wasn't just 2 minutes, but either 30 mins or 60 minutes. You still have the issue would you rather a) do nothing and wait for the market to unlock or b) trade options and pay exorbitant bid-asks.
Interesting Story. Twenty plus years ago NYMEX used to have much tighter trading halt ranges, and longer halts. Back then NYMEX's rules where very member centric. Then Enron came out with Enron Online an internet based trading system. You could literally trade anything on it. CL look-a-like swaps, Weather Derivatives, Coal. Lumber, Plastics etc. (Showing my age here!) It wasn't too long before NYMEX had a price move triggered trading halt. But nothing said Enron Online had to obey NYMEX rules. So while the trading pits in New York were closed, and the locals could do nothing, the entire 'energy industry' continued trading on Enron Online as if nothing had happened. I don't remember the exact timing but it wasn't long after that the NYMEX circuit breaker rules were changed. The locals didn't like being left out in the cold!
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,059 since Dec 2013
Thanks Given: 4,410
Thanks Received: 10,226
I can't think of any CL examples, but this has happened many times in NG most recently in the last few months. I tried googling to see if there is a list of historical dates when this occurred but couldn't find anything.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,059 since Dec 2013
Thanks Given: 4,410
Thanks Received: 10,226
Something else you can do, is trade deferred months. Sure the prompt month contract might be locked limit up, but the 2nd, 3rd, 4th etc might not be. Hence if you need to buy, you could always buy one of those. Obviously leaves you spread risk between whatever you bought and the prompt month, but if you need to get out, it's an option. This doesn't work so well in NG because when moves like this happen it normally is in Nov-Feb and the entire Winter Strip (Nov-Mar) is locked limit and I would not recommend buying April as a hedge against the winter! Also doesn't work in any commodity that doesn't have a liquid forward curve (eg Equity Index's, Currencies to name a few).
Would buying far out of the money call and put options every month to cover both limit up and limit down events (essentially buying insurance for the unknown black swan event) be an economical solution? Or would it just not be worth it?
The cumulative amount you'd be paying up each time for that 1 in xx chance of it happening, and the trouble of actually doing it, would make it very unlikely to be worth it.