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Trader loses 130k+ on short, owes eTrade 100k
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Trader loses 130k+ on short, owes eTrade 100k

  #81 (permalink)
Elite Member
prague, czech republic
 
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xelaar's Avatar
 
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Big Mike View Post
Survival of the fittest. Brokers like that take on extra risk in exchange for attracting more accounts.

Sent from my phone

I personally like that option just like in forex, because just like you argue yourself it allows to keep a minimum amount of money on account and reduce counterparty risk as much as possible. But to a greedy and dumb it offers a way to kill themselves. Just like a rope and some soap.

Trade to live. Not live to trade.
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  #82 (permalink)
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Christchurch, New Zealand
 
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I'm not sure who's more negligent here, the idiot who placed the trade, or Etrade for offering shorts.

Hard to imagine a broker with good risk models offering shorts on a micro cap biotech.

"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
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  #83 (permalink)
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Helsinki, Finland
 
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xelaar View Post
I personally like that option just like in forex, because just like you argue yourself it allows to keep a minimum amount of money on account and reduce counterparty risk as much as possible. But to a greedy and dumb it offers a way to kill themselves. Just like a rope and some soap.

IMO well said !

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  #84 (permalink)
Elite Member
Helsinki, Finland
 
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Fat Tails View Post
...
Summarizing: Your stop loss would have been certainly honored at CME futures, which means that you would have been able to control your risk all the time, including the early period when the Asian markets were open. Stocks were not tradeable during the Asian market hours, did not produce any quotes at the open, suffered from a sudden loss of 10% and more. During the remainder of the session market data for stocks was delayed by 15 minutes. How would you have managed your risk under those conditions? Even diversifiying your stock portfolio would not have helped you.

Yes that was the point. If there is no ask offers how do you sell. Stops cannot work. What I learned about the flash crash was it was more question about the delays not missing offers which lead to a situations without trading... I may be wrong...

BUT of course I understand and agree with you the liquid stock index futures are MORE safe than pure stocks.

What comes to managing risk is what I said earlier that there is NO other way to fix than try to hedge IF you are lucky to find something tradeable. The interesting question is for example that what are our options for a hedge in the case of invalid ES futures ? Should discussed in another thread I think (OT here).

Summasummarum:
Every market and instrument can go invalid and you can be totally trapped if there is no willing to buy or sell. During that time the markets can prepare for a big gap and when it again resumes you may be in deep trouble.

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  #85 (permalink)
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Sydney, Australia
 
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Part of risk management is to set up a company to protect yourself (which is what I've done) in case the market sucker punches you right in the ****.

It may sound dirty but as any businessman will tell you, it is essential because bad deals happen.

Pretty expensive lesson but he probably could have avoided this by learning about risk management before he decided to short a low float stock.

I bet he has the full collection of Tim Sykes videos.

Come to Australia, where FX leverage up to 1:500 is legal.

CFDs are legal too, up to 1:20

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  #86 (permalink)
Trading Apprentice
Batavia NY
 
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Itchymoku View Post
just give him a few bucks and stop asking questions


lol you all are suckers.

Someone else will probably set up a gofundme because they donated to this guy and it was all a scam so we need to pay back the people for getting scammed.

How many thousands of people lost their life savings in ponzi schemes the past decade trying to make what they thought were safe investments? I feel bad for them,
Biotech speculator? Fuck no.

The obvious scam here is you collect 20k and have fun spending it on nonsense. Then file bankruptcy to settle the actual debt.


Last edited by justrandom; November 22nd, 2015 at 09:14 AM.
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  #87 (permalink)
Market Wizard
Houston, TX
 
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PeakGrowth View Post
Part of risk management is to set up a company to protect yourself (which is what I've done) in case the market sucker punches you right in the ****.

It may sound dirty but as any businessman will tell you, it is essential because bad deals happen.

In my experience US brokerage companies require a personal guarantee if trading out of a company, which negates a lot of the protection the company gives you.

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  #88 (permalink)
Elite Member
Los Angeles
 
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Big Mike View Post
Imagine losing every dollar in your current account right now, in 2 hours, while you were away at a meeting. Then imagine tripling that loss and having to liquidate your retirement accounts for you and your wife.

I feel for him, I really do.

Mike


No feelings in my book. This guy shorted a $2 stock (could you even short a $2 stock in E-trade, and if so get a hold of that much?) he clearly does not know how to figure out his risk management when shorting so much of a $2 stock. He should have never shorted so much on a penny stock and now begging for money. He should man up and find a part time job, McDonalds I am sure will hire him. I do not think it would take more than 4 years of working part time to cover the bill. He is a joke.

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  #89 (permalink)
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Houston, TX
 
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Neo1 View Post
I'm not sure who's more negligent here, the idiot who placed the trade, or Etrade for offering shorts.

Hard to imagine a broker with good risk models offering shorts on a micro cap biotech.

They sure can. But one thing we don't know is who was on the other side of the trade. It could be Etrade themselves.

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  #90 (permalink)
Market Wizard
Boca Raton
 
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As a broker, I would say this: We expect the trader to use some common sense when it comes to risk, and follow through when it comes to risk management. Specifically in futures, if you use high leverage, short options, etc. then pay attention and realize that the "Black Swan" will happen to you. It's not if, it's when. Your attention to details combined with the quality of your risk management, and your risk appetite will determine the impact on your account.

Do not under any circumstances leave positions unattended.
Do not underestimate the leverage your carry with your futures, or short options.
Prepare for the one off events and PLEASE do not pay much attnetion to arguments based on past events.
Anything can and will happen.

Matt
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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