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Oil price negative?


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Oil price negative?

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 GFIs1 
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Oil price might fall into negative numbers

Several sources are indicating the today very low oil price might fall to zero or into negative numbers. (see Bloomberg and other this month).
The point is the crucial oil storage which is no longer there: oil ships, tanks etc. are all full because of the still massive positive supply over the demand as there are nearly no planes in the air, no vehicles on the roads and winters were much to warm for selling heating oil.
Thus oil companies are looking for clients that take fresh oil for a minus price without storing first.

Today it came out that CME group made a platform update over the last weekend to handle negative prices in trading.

GFIs1

Edit: this thread is not a trading lounge. Instead it is following a special economic theme: how a commodity can fall into a negative range.
In the time I studied economics at the university that was a scenario that never will and never can happen.
As we have seen with interests in the banking sector it happened. - Let us see the future of commodities here. Maybe oil is the first one to show a similarity.
Discussions about are most welcome.

Edit 2: After the historic event of minus numbers in oil on April 20, 2020 here a layout of the effects in economy:

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 tr8er 
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Yep, but also the huge contango is funny it is close to $ 7.--, I've never seen this before, because normally if roll-over starts, the prices narrow. The volume between the May and the June contract is equal (so we will roll later today or tomorrow).

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GFIs1 View Post
Oil price might fall into negative numbers

Several sources are indicating the today very low oil price might fall to zero or into negative numbers. (see Bloomberg and other this month).
The point is the crucial oil storage which is no longer there: oil ships, tanks etc. are all full because of the still massive positive supply over the demand as there are nearly no planes in the air, no vehicles on the roads and winters were much to warm for selling heating oil.
Thus oil companies are looking for clients that take fresh oil for a minus price without storing first.

Today it came out that CME group made a platform update over the last weekend to handle negative prices in trading.

GFIs1

Thanks.

For anyone needing details, the CME advisory @GFIs1 mentioned can be found at https://www.cmegroup.com/content/dam/cmegroup/notices/clearing/2020/04/Chadv20-160.pdf

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 SMCJB 
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Prices already are negative in some parts of the country!

If you look in the crude thread and the selling options thread I posted information on the announcement and implication of negative price functionality by CME.

As an aside I remember 20 years ago when energy products first started trading electronically and exchanges couldn't handle negative prices! They'd never seen it before!

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WSJ Economist consensus outlook is at $26 for June. it's easy to see who's heavily short in this thread lol

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bob666s View Post
WSJ Economist consensus outlook is at $26 for June. it's easy to see who's heavily short in this thread lol

June settled $25.14 which for all intensive purposes is the same as your WSJ economist $26. Hence I'm not sure your point?

With regards to heavy shorts, Commitment of Traders shows that speculative length is actually long and increasing it's position.

For me personally I do have some option positions on that have a negative delta, so I guess that makes me a short. But trust me my option position is insignificant versus my spread butterfly position.

If you have an opinion maybe you want to post in the main crude thread here.

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 GFIs1 
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Monday 20th April: Morning prices of

WTI crude on new lows: $14.70
Trend down.
Is the same with other oil sorts too.

GFIs1

edit 13:40 - down to $12.52
edit 14:00 - down to $11.23
edit 17:00 - down to $10.50 - means -40% down since midnight!

besides: US fracking oil was on Friday around $10 - for today we will see

nearing ZERO with high speed

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 GFIs1 
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"This thread is not a trading lounge. Instead it is following a special economic theme: how a commodity can fall into a negative range.
In the time I studied economics at the university that was a scenario that never will and never can happen.
As we have seen with interests in the banking sector it happened. - Let us see the future of commodities here. Maybe oil is the first one to show a similarity.
Discussions about are most welcome."

I added this part above into post #1 to set the focus.

GFIs1

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 SMCJB 
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Just FYI Natural Gas Prices in West Texas have gone negative multiple times in the last year. Yes paying people to take it from you! There are limits to how much gas you are allowed to flare, and once you pass that limit you have to pay somebody to take it. Why would producers continue to produce something that has negative value? It's associated gas meaning they are actually drilling for oil and the gas comes with the oil, so the only way to stop the gas would be to stop the oil as well. (As a side note oil well shut-ins is bullish Natural Gas fundamentals. Good job as the country was close to drowning in gas!)

Also in the Eurodollar* market, the price is 100 - index interest rate, so a price of 99.50 represents an interest rate of 0.50%. The Eurodollar market has listed, and has open interest in options with strikes greater than 100 which means they have options with negative strike prices**.

* Eurodollar's represent 90day USD loans outside of the US and are based upon LIBOR. Very different than the EUR;USD exchange rate.
** When modeling a Eurodollar 100 Call, you actually model the underlying which is a 0% Put.

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 SMCJB 
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Also copying these in from the main crude oil thread for reference.


SMCJB View Post
Here's something to start thinking about ...

CME :- Changes to Price and Strike Price Eligibility Flags for Certain Energy Products

This Sunday, April 5 (trade date Monday, April 6), as an operational step toward potentially supporting negative pricing and strikes, the MDP 3 Security Definition (tag 35-MsgType=d) for these NYMEX Energy outright futures and options on CME Globex will be flagged as eligible to trade at negative prices. The options on futures will also be flagged as negative strike price eligible. Trading at negative prices for these outright markets will not be supported at this time. Negative strike prices will not be listed.


SMCJB View Post
Negative Crude Oil Prices????

ADVISORY #: 20-152
SUBJECT: CME Clearing Plan to Address the Potential of a Negative Underlying in Certain Energy Options Contracts

https://www.cmegroup.com/content/dam/cmegroup/notices/clearing/2020/04/Chadv20-152.pdf

If WTI Crude Oil futures prices settle, in any month, to a price between $8.00/bbl and
$11.00/bbl, CME Clearing MAY switch its pricing and margining options models from the
existing models to the Bachelier model, currently utilized in numerous spread options
products where negative underlying prices and strike levels are a regular occurrence. If
any WTI Crude Oil futures prices settle, in any month, to a level below $8.00/bbl, CME
Clearing WILL move to the Bachelier model for all WTI Crude oil options contracts as
well as all related crude oil options contracts effective the following trade date. CME
Clearing will send out an advisory notice with one day notice before any implementation
occurs with all appropriate details.


I looked for a layman's definition of the Bachelier model but couldn't find anything easy to understand.


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 GFIs1 
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Thanks @SMCJB

"NYMEX Energy outright futures and options on CME Globex will be flagged as eligible to trade at negative prices. The options on futures will also be flagged as negative strike price eligible. Trading at negative prices for these outright markets will not be supported at this time. Negative strike prices will not be listed."

A week after the message you cited above CME made the update on their software over weekend to let negative pricing happen. For this - if it will be introduced - a official statement should be released. If it is not yet.

Interesting times though.
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 SMCJB 
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After this move.. maybe coming today...

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 GFIs1 
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From some sources it is to note that 40M barrels of oil on several ships are on its way to USA. It was loaded in March in Saudi Arabia and is ready to be unloaded in May at the east coast of USA.
This volume is the background for the fracking oil from Texas to be sold for *nearly nothing as all the tanks are already full and the process of getting out the oil there is technically said a very difficult thing.
It is not sure if a fracking field can easily being restarted after having stopped the process.
Therefore the prices are now in free fall to prevent the fracking guys of getting out the markets.
Economically this might be a good reason to sell the overload of pumped US oil with negative pricing.

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 SMCJB 
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WSJ did an article on the Saudi VLCCs last week, I didn't link it here as it was behind the paywall. Goldman Sachs also did a big research piece a few weeks back. Their argument was related to what @GFIs1 is saying. That there could be so much logistical damage done that when things do turn around, how long will it take US Shale to recover. If Storage gets full, and pipelines backup, won't they have to shut wells?

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 GFIs1 
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A short overview on WTI crude - just intraday - 18 hours - an amazing slope



Not finished yet.

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 SMCJB 
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$6.67 now

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SMCJB View Post
$6.67 now

great - thanks - was too slow to bring the chart to here in time

As you announced, price might touch the ZERO line today.

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 SMCJB 
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Low of the day $4.04

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GFIs1 View Post
For this - if it will be introduced - a official statement should be released. If it is not yet.

Just happened....

The following May 2020 Energy products (CLK0, HOK0, QHK0, QMK0, QUK0, RBK0, HCLK0, RTK0, WSK0, RLXK0, TCSK0, MPXK0, 23K0, CSXK0, 26K0) have no low limit and may trade negative.

If you have any questions, please contact the CME Global Command Center in the U.S. at +1 800 438 8616, in Europe at +44 20 7623 4747 or in Asia at +65 6532 5010.

The sender provided the following contact information.
Sender's Name: CME Global Command Center
Sender's Email: gcc@cmegroup.com
Sender's Contact Phone: 1 800 438 8616


The Q products are the mini's. WS is the financial bullet. HCL WTI @ Houston, not sure about the others of the top of my head.

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I didn't think anything was allowed to trade in -ve in markets, I'm never forgetting this day in my life.

This also speaks volumes about in markets anything is possible. It would be really interesting to see where this ship goes now

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Happens in energy. As well as the Natural Gas examples I gave earlier I forgot that Power/Electricity often trades negative at night. It costs so much to stop and start a coal plant that at 2am they are selling power at negative prices as it's cheaper than going offline and having to restart.

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WTI 19:30 @ 2,45USD

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Trades 92c!

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 GFIs1 
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In the following posts I would like to point out to what negative pricing of a commodity will have as impact:
• DOMINO effect
• on production sites
• on storage
• on delivery
• on clients
• on transports
• on currencies
• on stability

on... you name it!
We are really at a crucial point right now.

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It went under 2 bucks WHAT is happening? So how does this affect cash prices end of day? Wow


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New Low 1c.

@GFIs1 while I do agree with you, should clarify we are talking about CL which is a landlocked crude in Cushing Oklahoma. Barrels North will be even worse (can only wonder what Canadian crude is worth). West Texas prices will also be even lower. But prices on the Gulf Coast @ Waterbourne will not be as bad. This really is a situation specific to 'inland' US.

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jokertrader View Post
It went under 2 bucks WHAT is happening? So how does this affect cash prices end of day? Wow

Really isn't any cash prices anymore. Cash is CLK0 in 24 hours 20 minutes!

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 SMCJB 
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LOW PRINT -$40.32

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SMCJB View Post
New Low 1c.

@GFIs1 while I do agree with you, should clarify we are talking about CL which is a landlocked crude in Cushing Oklahoma. Barrels North will be even worse (can only wonder what Canadian crude is worth). West Texas prices will also be even lower. But prices on the Gulf Coast @ Waterbourne will not be as bad. This really is a situation specific to 'inland' US.

Absolutely - I have been in that region - in the south of Kansas and know it from there.
In Cushing is CME located.
Just looking for the first pricing with negative numbers.
And from there a domino effect might happen.
Good trades!
Just to let you know I have never traded oil as it is against all my philosophies.
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SMCJB View Post
LOW PRINT -$40.32

I couldn't get it on chart on tradingview (its stuck at 0.01), is it just me or we can't have some chart? I can share this with my grandkids in future

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I couldn't get it on chart on tradingview (its stuck at 0.01), is it just me or we can't have some chart? I can share this with my grandkids in future

Great!
If you want to show it to your grandkids then they will ask you: "what is oil???"
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web

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Historical day for the future of oil and all its dependencies - indeed

Congrats to @SMCJB for the good wording in this situation - exact landing!

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 Jolew 
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Wow.
10 sec chart - CLK20

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 bassa 
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Was long QMK0 @ IB... Could not sell.. Lowest offer I could put into the system was 0.025... Now they told me I will get settled @ minus 37... This blew my account big time.. Can't believe this is possible... They where not prepared for negative prices and now I am f****

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  #36 (permalink)
 Big Mike 
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I'm sorry, but did you not know it was rollover?
bassa View Post
Was long QMK0 @ IB... Could not sell.. Lowest offer I could put into the system was 0.025... Now they told me I will get settled @ minus 37... This blew my account big time.. Can't believe this is possible... They where not prepared for negative prices and now I am f****

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 bassa 
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I knew it was the last day of trading... But didn't realized it could go negative... But once it went to zero... I wanted out... But than I saw the system could only put in a 0.025 offer....

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 jokertrader 
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Sorry to hear... did u ask IB what they will do? Thank goodness was QM and not CL yes tough loss to swallow but hopefully u didn’t have too much on. Talk with IB and make sure u will be fine and my honest 2 cents is work on research/learning and not revenge trade ... all of us have been there... u will feel good once u put in the time and learn


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 bassa 
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Yes.. Did ask ib... They said I will get settled at - 37..

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 Jolew 
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bassa View Post
... Could not sell.. Lowest offer I could put into the system was 0.025...

You couldn't even place a market order? Sorry about what happened to you. It was really sickening to watch this today.

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 Big Mike 
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Do you mind sharing how much this cost you? So other traders reading this can benefit from not making the same mistake.
bassa View Post
Yes.. Did ask ib... They said I will get settled at - 37..

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 SMCJB 
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Settlement price will be 37.63. On one lot of QM that's a $18815 difference than selling at 0 and a $27,950 change from Friday night.

@bassa sounds like IB's systems do not allow negative prices. You were unable to liquidate your positions because of flaw in their software. That is 100% their fault and they can not blame any other party. CME has been sending out messages that they would allow prices to go negative for at least two weeks. IB obviously ignored the. Sounds like IB may have some liability there.

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SMCJB View Post
Settlement price will be 37.63.

-37.63, to be clear

I would definitely be asking them to confirm their system does support negative prices, and ask them to explain why you were seeing that bid price.

@bassa would you clarify, did you try a market order?

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 bassa 
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I was long 2 lots.. Did not try a market order... All the data at ib was not present.. They basically cleared all data in their terminal once it hit 0... So I was completely in the blind...

The problem with ib market order, is that it is never a real market order.. The cap it at a certain percentage , so you can't do crazy stuff... So not sure a market order would have saved me




Just asked for compensation...

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bassa View Post
I was long 2 lots.. Did not try a market order... All the data at ib was not present.. They basically cleared all data in their terminal once it hit 0... So I was completely in the blind... Attachment 295966


Just asked for compensation...

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So your true PnL is closer to a $50k loss?

Please do keep us posted on what IB has to say about their system supporting negative prices. Especially given you are showing the data feed was inactive/blind once it hit zero. I would say you likely have a case just based on this preliminary info. I would imagine there will be a class action if what you experienced is true, a lot of others will say the same. If that ends up happening, you should consider joining the class action.

That god it was QM and not CL.

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 Big Mike 
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So @bassa if I have the math right (please check), you are responsible for a 14k loss on your own by sitting and letting it go to zero, where presumably you could have exited at any time.

Once it went below zero, IB didn't allow you to get out with a limit order, although you did not try a market order and we don't know the result. Once it fell below zero, you lost an additional 36k.

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 bassa 
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@bigmike 38k loss....

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 bassa 
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No... I never had the 14k loss... Bought the pos @ 70cents.. So would have had a 1400 usd loss at 0

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 bassa 
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On their own website productpage. They themselves say that this product has a price range of >0... Well that turned out quite different

https://contract.ibkr.info/v3.10/index.php?action=Details&site=GEN&conid=341760935


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 bassa 
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Big Mike View Post

I would say you likely have a case just based on this preliminary info. I would imagine there will be a class action if what you experienced is true, a lot of others will say the same. If that ends up happening, you should consider joining the class action.

Not a US national, so no clue how to join that, would that be an option in the future...

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 SMCJB 
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Lot of evidence here that IB are negligent.

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 casey44 
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.

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 GFIs1 
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After seeing a historic event in oil - now a sneak preview on effects



We are still at the beginning - things WILL CHANGE in 2020 and after.
Reflections are welcome

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 AlexSobol 
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We really live in interesting times

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  #55 (permalink)
 GFIs1 
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Impact on $

Oil was historically a strong base for gross domestic product in the USA and a most important factor worldwide as oil is traded in US dollar. When oil is nearly nothing worth as we see these days then a main export factor is breaking off. Looking at sales figures worldwide then these numbers are in the cellar. With it the gains too.

A further impact may be come that the longtime legitimization bonus of the $ for oil might be skipped.
Thus the US economy with production and banks will be negatively influenced.
Not to forget that many banks outside of USA (GB, Germany, Switzerland, Arabic states +) are heavily bound with credits especially in oil which now looks very bad for their invested assets.

To be clear - the oil is not THE cause but part of a deflating bubble which was growing since the financial crisis of 2008. The recession is here. Inflation will be weighing heavily for coming years. On all industrial countries.

What does it mean for the trader? One has to observe the currency pairs to the $ carefully in coming months. Plus weighing up the risk that is involved by certain combinations in trading positions when in connection with US currency.

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 Pa Dax 
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SMCJB View Post
Settlement price will be 37.63. On one lot of QM that's a $18815 difference than selling at 0 and a $27,950 change from Friday night.

@bassa sounds like IB's systems do not allow negative prices. You were unable to liquidate your positions because of flaw in their software. That is 100% their fault and they can not blame any other party. CME has been sending out messages that they would allow prices to go negative for at least two weeks. IB obviously ignored the. Sounds like IB may have some liability there.

This might be a tough fight. From what I saw yesterday using IB TWS was that the charts weren't working but I still had bid and ask prices (negative). I still have them now. Their contracts and agreements on futures trading are pretty solid.
I get an e-mail from IB every time I trade a new contract that the contract description is misleading and that May expires in April. I also get a notification if I hold positions close to expiry and that IB does not support physical delivery and will close out automatically.
However, most importantly, IB wants to see that you tried everything you could to get out of this position and the audit trail of TWS will be required (does the mobile app have audit trail btw?) to see if you tried market orders, whether or not you tried calling their order desk, if you filed a mistrade request, all that. The simple fact that their application didn't work is not enough - I've seen if many times before where the app does something strange and you're not sure if you're in our out of a trade - doesn't matter.

For cancellation requests for example, they state:

Quoting 
For all such trades, a participant in the transaction ("Participant") must notify IBKR within thirty (30) minutes of the execution of the trade by using the Trade Cancellation Request tool located within Account Management. While requests received via telephone will also be processed, such requests may involve wait times which, in the aggregate, may lessen the likelihood that the petition is submitted in time. Please note that IBKR does not support email communications for this purpose and requests sent through the Help & Contacts link on the website are not intended for matters of urgency.

I don't like to be bringing you bad news, but IB will challenge you on the above. You initiated a new position an an expiring contract in a fast down moving market where liquidity had already rolled over and you took it with just hours left till IB demands you to be clear of the contract.

I'm sorry for the loss @bassa but I believe it's better to be realistic than hopeful on this one. I see you're also from the Amsterdam area, send me a pm if you need reference to a lawyer on this subject. I'm from the same area. Again, real shitty that this happened to you. I wish you well.

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 GFIs1 
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@bassa

Help you can get here - best to call IB Zug Switzerland for such problems, even it is late for it - they may give you good advice how to handle it:

Switzerland
Phone: +41417269536

United Kingdom
Phone: +44 207 710 5696

For a second try I have included the London number too.
As a longtime IB client I got help very quickly when in trouble.
Of course on last day for futures or with very wide set stops the client has to know what he does. Such "errors" are quite normal (eg. the MAY contract ends in APRIL) and more.

Have always both phone numbers plus your client number @ hand when you are live trading.

Good luck
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 mzelixon 
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Guys I don't trade oil anymore but can someone tell me which contract went negative???
The May one?
Because I use NinjaTrader with CQG and I only see it dipping just slightly above zero.
Something must be off.


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 Pa Dax 
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mzelixon View Post
Guys I don't trade oil anymore but can someone tell me which contract went negative???
The May one?
Because I use NinjaTrader with CQG and I only see it dipping just slightly above zero.
Something must be off.


I think it depends on your data provider whether or not they have already adapted to negative prices. Some just stop at 0 or do other strange things.

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 GFIs1 
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@mzelixon

It was the MAY contract (future). It closed yesterday.
Here a chart with the rollover pricing of WTI of TODAY - as we can see the price was near -$20 around midnight CET. Yesterday it went down to around -40$/barrel



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PS: I don't trade oil (neither which contract) - neither long nor short.

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 Big Mike 
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 Pa Dax 
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Big Mike View Post

Fact that it plunged so quick to -20 makes me wonder.
I'd be laughing my pants off if it turns out that some algo's and HFT were not adapted to negative rates and traded this as if it were positive numbers.

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 SMCJB 
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Pa Dax View Post
This might be a tough fight. From what I saw yesterday using IB TWS was that the charts weren't working but I still had bid and ask prices (negative). I still have them now. Their contracts and agreements on futures trading are pretty solid.
I get an e-mail from IB every time I trade a new contract that the contract description is misleading and that May expires in April. I also get a notification if I hold positions close to expiry and that IB does not support physical delivery and will close out automatically.
However, most importantly, IB wants to see that you tried everything you could to get out of this position and the audit trail of TWS will be required (does the mobile app have audit trail btw?) to see if you tried market orders, whether or not you tried calling their order desk, if you filed a mistrade request, all that. The simple fact that their application didn't work is not enough - I've seen if many times before where the app does something strange and you're not sure if you're in our out of a trade - doesn't matter.

Great points @Pa Dax and even if he is 100% in the right it will be a tough fight. This doesn't appear to be a software glitch, or a problem with an order not being handled right, this appears to be an issue where there software was intentionally* programmed not to be able to handle certain market conditions. That is negligence surely?

* Well at least they intentionally ignored messages from CME that this product had changed and would now be allowed to trade negative.

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 LastDino 
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Pa Dax View Post
Fact that it plunged so quick to -20 makes me wonder.
I'd be laughing my pants off if it turns out that some algo's and HFT were not adapted to negative rates and traded this as if it were positive numbers.

Damn!

I wish I could give more than one likes for this. Just thinking about it is making me laugh like crazy

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 kevinkdog   is a Vendor
 
 
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One lesson here is that retail traders run significantly more risk when they try to trade in the "after rollover, before expiration" time period. Most brokers automatically exit any such positions, not sure what IB's policy is.

Of course, dramatic moves can happen before rollover, but REALLY dramatic moves can happen right before expiration.


Edit: Just got this from Tradestation, they want people out of June too!

Valued Futures Clients:



Due to certain anomalies affecting Crude Oil Futures, trading in the front month futures for Crude Oil and Mini-Crude, CLM20 and QMM20, have been set to Liquidating Trades Only. Any positions in CLM20 and QMM20, both long and short, are subject to liquidation. Options in Crude Oil are also set to Liquidating Trading Only on the Futures Plus platform. Trading is still available in the further out months for Crude Oil and Mini-Crude outright futures contracts, but may be subject to change. We will advise when conditions change.

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 SMCJB 
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So @kevinkdog is Tradestation doing a good job of being proactive or does this make them look bad?

My vote is bad. If your concerned about the risk raise margins. Say effective tonight you are going to charge 150% of exchange margins on CLM0 and QMM0 positions.

Interesting expiration day
CLK0 +4302
CLM0 -725
The Spread that dropped $51.30 yesterday is up $50.27 today! Get that wrong and it was a quick way to lose $100/barrel!

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 Pa Dax 
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From what I read, the charting of TradeStation also didn't support negative prices?

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SMCJB View Post
So @kevinkdog is Tradestation doing a good job of being proactive or does this make them look bad?

My vote is bad. If your concerned about the risk raise margins. Say effective tonight you are going to charge 150% of exchange margins on CLM0 and QMM0 positions.

Interesting expiration day
CLK0 +4302
CLM0 -725
The Spread that dropped $51.30 yesterday is up $50.27 today! Get that wrong and it was a quick way to lose $100/barrel!

I think they already were at 200% margin. They must have had some accounts with big exposure, and TS decided they did not want to be left holding the bag in case something really bad happens. Crazy times

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 kevinkdog   is a Vendor
 
 
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From what I read, the charting of TradeStation also didn't support negative prices?

I saw someone said TradingView had that issue, but Tradestation charts handled negative prices just fine...


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 GFIs1 
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Edit: Just got this from Tradestation, they want people out of June too!

Valued Futures Clients:

Due to certain anomalies affecting Crude Oil Futures, trading in the front month futures for Crude Oil and Mini-Crude, CLM20 and QMM20, have been set to Liquidating Trades Only. Any positions in CLM20 and QMM20, both long and short, are subject to liquidation. Options in Crude Oil are also set to Liquidating Trading Only on the Futures Plus platform. Trading is still available in the further out months for Crude Oil and Mini-Crude outright futures contracts, but may be subject to change. We will advise when conditions change.

Seems clear: the nearer to the 0-line - the less interest by the broker.
Taking money aka making money - no problem. Stuff over some lines - forget it. As always
GFIs1

PS: after the June contract is in minus it will certainly be followed by July etc.: as the musician reads
"da capo al fine" which means from the beginning again to the end - lol -

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 SMCJB 
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kevinkdog View Post
I think they already were at 200% margin. They must have had some accounts with big exposure, and TS decided they did not want to be left holding the bag in case something really bad happens. Crazy times

CME Member Margin for Jun20 today is $6,400 and tomorrow when it becomes prompt will be $7,500. Non Member rates 110% of that so $7,040 and $8,250. That's quote a lot of protection. Maybe the craziest thing about this is that the K/M *SPREAD* has moved $50 two days in a row. The margin requirement for the spread itself is only $2500! For June/July it's only $1100!

https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_performance_bonds.html

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 SMCJB 
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GFIs1 View Post
PS: after the June contract is in minus it will certainly be followed by July etc.: as the musician reads "da capo al fine" which means from the beginning again to the end - lol -

I've been asking this for over a month. Unless Demand exceeds Supply for June isn't the situation worse in June than it was for May? I think the big contango spread should always have been June/July or maybe even July/August.

Raise your hand if you think Demand exceeds Supply for June?

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 SMCJB 
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Bid ask in CLK0 is nearly $2 wide and settlement range doesnt start for 50 mins

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 Pariah Carey 
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My broker TD Ameritrade stopped taking orders on the June contract about 10 minutes ago. Can’t trade it.

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June down $13

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SMCJB View Post
I've been asking this for over a month. Unless Demand exceeds Supply for June isn't the situation worse in June than it was for May? I think the big contango spread should always have been June/July or maybe even July/August.

Raise your hand if you think Demand exceeds Supply for June?

It is just only a physical problem:
If you stop a well (fracking) it is DESTROYED.
Thus supply at this moment of over flooding stocks in USA and in Arabic states of course are higher than any demands since a year. Direction for next months is clear!

GFIs1

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Jun-Dec/Bal-Year strip was down $6.80 today from $28.50 to $21.70 a drop of about 25%. Implications to the US oil industry....

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@bassa looks like you weren’t alone.

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


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 SMCJB 
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Thats rare for IB they are known for being extremely aggresive in liquidating client accounts at the smallest hint of a margin call. I wonder whether their liquidations also didnt work because of the negative price issue?

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SMCJB View Post
Thats rare for IB they are known for being extremely aggresive in liquidating client accounts at the smallest hint of a margin call. I wonder whether their liquidations also didnt work because of the negative price issue?



That’s my assumption.

I also assume if anyone tried to call the trade desk they also wouldn’t have been able to get you out.


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 Alaskajeff 
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I received this email notification from Amp today:

Posted by AMP Futures on Apr 21, 2020
updated 1pm - April, 21, 2020

Due to certain anomalies affecting Crude Oil, Futures have been set to Liquidating Trades Only. Any positions in CLM20 and QMM20, both long and short, are subject to liquidation..

This is an unprecedented times....YOU must trade responsible.

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SMCJB View Post
So @kevinkdog is Tradestation doing a good job of being proactive or does this make them look bad?

My vote is bad. If your concerned about the risk raise margins. Say effective tonight you are going to charge 150% of exchange margins on CLM0 and QMM0 positions.

Now it is is looking like Tradestation was first with this, and doesn't look bad at all.

Like you, I though it a bit severe at first, but I guess not!

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kevinkdog View Post
Now it is is looking like Tradestation was first with this, and doesn't look bad at all.

Like you, I though it a bit severe at first, but I guess not!

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?

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 SMCJB 
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I know AMP and Tradestation are trying to the CME's margin department job for them but don't worry CME is on the ball.

From the Crude Analysis Thread...


SMCJB View Post
JUN20 CRUDE OIL MARGINS UP 33% EFFECTIVE WEDNESDAY 22ND APRIL

Maintenance margin as follows (Initial Margins, ie non-member rates will be 110% of these)
Tier 1 increasing from 7500 to 8500, +1000 or 13.3%
Tier 2 increasing from 6400 to 7200, +800 or 12.5%
Tier 3 increasing from 5950 to 6700, +750 or 12.6%
Tier 4 increasing from 5500 to 6200, +700 or 12.7%
Tiers 5-9 also increase.

*NOTE*
On Tue 21st Jun20 was Tier 2 and on Wed 23rd willbe Tier 1 so actual increase is 6400 to 8500 +2100 or +32.8%
Similarly Jul20 was Tier 3 now Tier 2 so actual increase is 5950 to 7200 +1250 or +21%
Remember non-member rates will be 110% of these

https://www.cmegroup.com/notices/clearing/2020/04/Chadv20-170.html


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So your true PnL is closer to a $50k loss?

Please do keep us posted on what IB has to say about their system supporting negative prices. Especially given you are showing the data feed was inactive/blind once it hit zero. I would say you likely have a case just based on this preliminary info. I would imagine there will be a class action if what you experienced is true, a lot of others will say the same. If that ends up happening, you should consider joining the class action.

That god it was QM and not CL.

Mike

I Lost 450k in same liquidations through IB. Looking for the same victims for class action

1. On interactive brokers website were no warnings that the price of an asset could be negative
2. During the trading session, I tried to close this position with a negative limit price(-0.01 us dollar), but technically platform does not allow this. I recorded video from a PC, as well as from a mobile terminal.
3. Within a short time IB closed trading under this contract and I did not have a chance to carry out any operations

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 jokertrader 
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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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 Big Mike 
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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 was my understanding as well, although I was really surprised it was that low of a number.

IB should be reaching out to those affected and explaining. This has a way of causing a ripple effect as well on their accounts, margin calls on other products, etc. The liability is even more than just covering the loss below zero.

Mike

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@maksend, you need to list a valid physical location in your profile. "Planet Earth" is a violation of our very clear rules about this, please take it seriously.

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 addchild 
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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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My understanding is that the 88M is just the shortfall they had to cover with the exchange, not necessarily accounting for the equity in the account that still existed with CL at $0.


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 SMCJB 
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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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Big Mike View Post
That was my understanding as well, although I was really surprised it was that low of a number.

IB should be reaching out to those affected and explaining. This has a way of causing a ripple effect as well on their accounts, margin calls on other products, etc. The liability is even more than just covering the loss below zero.


addchild View Post
My understanding is that the 88M is just the shortfall they had to cover with the exchange, not necessarily accounting for the equity in the account that still existed with CL at $0.

Agree with @addchild. No mention of covering losses due to software issues. Implied it was accounts that went negative.

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 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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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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 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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 SMCJB 
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Probably going to involve a lot of legal fees for everybody involved

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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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 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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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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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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 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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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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Last Updated on January 23, 2021


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