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Help: Unusual case: Silver negative balance
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Help: Unusual case: Silver negative balance

  #1 (permalink)
Trading Apprentice
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Help: Unusual case: Silver negative balance

Hi all,

Would like to ask for your opinion.
I've been trading silver futures for 4 years and have never been in such situation.
On Dec 1st, silver dipped but managed to bounce back strongly, ending the day significantly up 7.5% compared to previous close.

So on the next day, Dec 2nd, when I received the daily email statement, I was expecting to see my account balance at a healthy 25k. But instead, it was negative 3.5k!

I quickly contacted my broker.

They told me that because the silver price dropped too fast, they had to sell all my positions (and somehow, they managed to do it near the bottom). They also told me that I have to cover the 3.5k loss immediately. I argued that they didn't have my authorization and had they not done so, I would be sitting on a 25k balance. They replied that it's already mentioned somewhere in their T&C that they reserved the right to do so, had no obligation to seek prior consent, and I should be the one responsible to cover the losses. I replied that it wasn't my action that made my account in such an unfortunate position. If it was due to my own decision and my account was in negative, it would surely be my responsibility. And in the past 4 years, I have never failed to top up my account when necessary. But they kept pointing to the same T&C clause.

So what should I do??? Am I screwed? Should I just pay up or pursue legal action? Is such a one-sided T&C provision enforceable in court?

Felix


Last edited by dragon80; December 3rd, 2014 at 06:37 AM.
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  #2 (permalink)
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  #3 (permalink)
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Was it a margin call?
Name of the broker?

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  #4 (permalink)
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Im guessing you are out of luck, unfortunately. Thats a standard broker clause and if there are any brokers or ex-brokers lurking around I am sure they could tell stories for days about this stuff happening. It makes sense too because that money is coming out of the brokers pocket and now he has to come chasing after you to get his money back and you know there are tons of people that blow out and just disappear. What if they didnt close you out and silver kept tanking and your account finished down 25k?

Finally, I say this not to piss you off but it might do just that, but you had waaaay too much risk on for the size of your account for this to happen. No one trade or position should ever be big enough to blow out your account, no matter how volatile the day.

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  #5 (permalink)
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@sam028: No, it wasn't margin call. The broker is Phillips.

@Profiler: Thanks for the insight about the standard clause. So in short, they can protect themselves without client's authorization and without informing the client, and it's ok law-wise and regulation-wise? And when in the act of protecting themselves, they cause the client to incur losses, they can't be held liable? Then I guess you are right, I AM out of luck.

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  #6 (permalink)
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Silver Trade

@dragon80 ....just curious of how many Contracts you were Trading, and how many cent the move went against your Entry Price?

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  #7 (permalink)
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sandptrader View Post
@dragon80 ....just curious of how many Contracts you were Trading, and how many cent the move went against your Entry Price?

Two contracts only.

The initial entry price was ~ $15.5. And when it was liquidated, it was $1 lower, at $14.5. But it was recently rolled over from December contract to March contract at $16.5.

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  #8 (permalink)
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Huge Range on Daily bar

That was Huge Range on that Daily bar with Volume 120000.....looks like Exhaustion bar.
I do not trade SI.....but this is not an Ordinary day as i cannot see Range this wide in sometime back on the Chart.
I still do not completely understand the Brokers Policy on Margin, but based on what you mention you were kicked out
of the Market with - 3500 which is near the Bottom i believe.....it looks like they had to do it because of not enough money in account to Maintain the 2 Contracts...even though the market turned and Rallied right back up to where it started it's fall.
This is making me feel nauseous ....i know you are ....i would Hope this would turn out Good for you somehow.

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  #9 (permalink)
Market Wizard
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dragon80 View Post
Hi all,

...
Am I screwed? Should I just pay up or pursue legal action? Is such a one-sided T&C provision enforceable in court?

Felix

Yes! and you are not the first one.

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  #10 (permalink)
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dragon80 View Post
Two contracts only.

The initial entry price was ~ $15.5. And when it was liquidated, it was $1 lower, at $14.5. But it was recently rolled over from December contract to March contract at $16.5.

here was is the hourly chart


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you gambled that the price was going to rise if you entered at $15.50.... but you probably decided to "protect" yourself by by entering a Stop-Loss at some number below this point...... right???

unfortunately the price plummeted shortly after you entered the order.... it probably blasted through the Stop-loss that you had set. You are not guaranteed to sell your contracts at your stop-loss price....that only guarantees to open a market order to sell your contracts at the best price your broker can get.

Apparently, the best price they could get was $14.50 (note the small volume traded during that plunge)

If this is what happened to you...you have not a leg to stand on.... the broker was probably executing the order as best they could (you have no evidence to prove otherwise...)

You just learned the trap of using a stop loss order.... personally in equities I use a LIMIT Stop Loss rather than a Stop Loss. In a limit stop-loss you set a range where you will accept a sale.... if it falls through this range without executing then the order to sell is cancelled unless it rises back into that zone again. Then you would have been able to make your own decision as to whether to cancel that limit stop loss and sell or hold tight hoping for a rise.

You purchased the contract at a drop that was already accelerating... it was a gamble that you lost.... lesson learned I hope

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