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Long and Short Positions at the Same Time?


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Long and Short Positions at the Same Time?

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  #11 (permalink)
Nashville, Tennessee
 
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kamicrazy View Post
It doesn't matter if you intend to trade different time frames.

If you have an overall long position you intend to hold overnight and then enter into an intraday short position you will simply exit your long.

This is due to regulations surrounding the handling of contracts to prevent a situation where you hold both positions.

You need two accounts to do this and as someone has already posted it could still be illegal.


This does appear to be the case.

Question answered.

grazie


AJ
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  #12 (permalink)
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The reason why Ninja Trader supports it in Sim mode is likely for one of these two reasons.

1) You used to be able to do this in the Forex cash market. The biggest example was MT4. If you had a long, opening a short would not close the long, you would have two open positions. In order to close a position you had to use a "close position" command.

I don't think all forex cash brokers did this. I don't remember MB Trading supporting this but I could be wrong.

2) It is legal in other jurisdictions. Along with increased leverage, like 400:1, brokers in other countries may offer such features. However most of these brokers will not allow US citizens to open an account...

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  #13 (permalink)
Nashville, Tennessee
 
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kamicrazy View Post
The reason why Ninja Trader supports it in Sim mode is likely for one of these two reasons.

1) You used to be able to do this in the Forex cash market. The biggest example was MT4. If you had a long, opening a short would not close the long, you would have two open positions. In order to close a position you had to use a "close position" command.

I don't think all forex cash brokers did this. I don't remember MB Trading supporting this but I could be wrong.

2) It is legal in other jurisdictions. Along with increased leverage, like 400:1, brokers in other countries may offer such features. However most of these brokers will not allow US citizens to open an account...


Thanks for the market insight

I notice you are a Mac user. ... Do you run the trading software off a PC partition - Bootcamp ?
or leave OS X running and use Parallels?


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  #14 (permalink)
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I use Sierra Chart through wine and I also have a PC I use to run multi charts. I connect to my PC using RDP.

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  #15 (permalink)
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kamicrazy View Post
I use Sierra Chart through wine and I also have a PC I use to run multi charts. I connect to my PC using RDP.


Ah, ... of course.. I forgot that option


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  #16 (permalink)
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solotrader View Post
Wash trades is considered in the US criminal activity.

... Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades.....

now you know how CME feels about your money.

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  #17 (permalink)
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I recalled I explored this strategy just over a year ago and had several email exchanges with my broker Mirus.

Aside from confirming the ability of NT to simulate this, Mirus confimed I could do this ie go long and short at the same time as long as i did this through two seperate accounts with them (which had to be in the same name).

I assume the fact that it is transacted through seperate accounts must satisfy the rules/law. I never actually persued it as I determined there was not really a viable strategy there ie double the margins, running two funded accounts etc - but I did get as far as receiving the paperwork from Mirus to open the 2nd account.

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  #18 (permalink)
Legendary Market Wizard
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solotrader View Post
Wash trades is considered in the US criminal activity.

"No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash trades or wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means."

https://www.cmegroup.com/tools-information/lookups/advisories/market-regulation/CMEGroup_RA1308-5.html

Exceptions are not clear.

I believe there is a difference between "having" long and short positions at the same time and "entering" or "creating" long and short positions at the same time. The latter is obviously a wash trade. but the former may not be. Note that the rule you quote references "orders" and not "positions". Either way it's probably something safest to avoid. As solotrader said it is a criminal offense in the US and people have been penalized for wash trades.

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  #19 (permalink)
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solotrader View Post
Wash trades is considered in the US criminal activity.

"No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash trades or wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means."

https://www.cmegroup.com/tools-information/lookups/advisories/market-regulation/CMEGroup_RA1308-5.html

Exceptions are not clear.


cory View Post
now you know how CME feels about your money.

The wash sale rule ( 534 ) is designed to stop people from doing 'bad' things. It is also prohibited by the Commodity Exchange Act.

I comes down to why would anyone want to go long and short at the same time. No matter what you do, at the end of the day, it is still your net position that matters.

Bart Chilton spoke about it last summer in Chicago talking about firms cheating by trading with themselves.

Math. A gateway drug to reality.
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  #20 (permalink)
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traderwerks View Post
The wash sale rule ( 534 ) is designed to stop people from doing 'bad' things. It is also prohibited by the Commodity Exchange Act.

I comes down to why would anyone want to go long and short at the same time. No matter what you do, at the end of the day, it is still your net position that matters.

Bart Chilton spoke about it last summer in Chicago talking about firms cheating by trading with themselves.

I can think of perhaps one reason to go long and short at the same time. When you pairs trade, isn't the objective to drop the loosing side and go the way of the winning position? Hence, once you've established the trend you go with the trend is your friend rule?

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