........Options have limit-locked levels as well. Although you may not be able to
create a synthetic at the exact price (at-the-money or in-the-money) of the
limit level, you should be able to create a synthetic position slightly
War story time: It was June 30 2011, the day a major crop report was coming out. I was long corn going into the report, and I knew there were going to be some fireworks and should have just gotten flat but I had a buy signal in my system and I was all bullish because there had been some major flooding in the Midwest that spring.
This is back when the report came out at 7:15 or 7:30, when the market was closed and didn't open til 9:30. So the market's got two hours to digest the news. Now the reports come out at 11 and it's not so wild. The report that day was a bearish shocker--way more planted acres than people anticipated. So for two hours I'm sitting there, nervously waiting in my long position. We open at 9:30 and immediately go lock limit down. It opened there and stayed there, didn't budge a tick all day. No chance to get out of my position. I remember calling my broker and asking about switching to options or another month because I'd heard about it, but I didn't know exactly how it worked and still don't, and anyway they couldn't help.
The limit back then was 30 cents. When we reopened that night it gapped another 30 cents and I was finally able to get out. So I lost 60 cents, or $3000 per contract. I'd had a really good spring trading corn, so at least it came out of profits. But that was a long day.
I think it would be difficult to get locked for days and days. That would take an event of truly biblical proportions. I've heard stories of the soybean market in '73 or '74 being limit up for like 10 days in a row.
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