how to avoid loss from gap up/down ?

[DanPickUp]

Re: how to avoid loss ?

Nowadays many small brokers are coming up with attractive brokerage plans. I'm worried about trade safety.

Suppose you shorted a future / option and your broker shuts down the business( due to bankruptcy/run away/some reason) some days later.

How do we close open positions in such odd scenario to avoid unlimited loss (assuming your trade is in loss) ? This is bit scary if the exit route also shuts down when broker is down.

do we have any exit routes in such situation ? Does NSE/SEBI has any guideline here ? Does the client suffer in these cases ? Also what are possible outcomes in such situations ? Please enlighten with facts.

Dear Megapixel

Some live experience about that from my side and I guess in India it will not be much different.

As posted in the past in the following thread: http://www.traderji.com/beginners-guide/61782-never-ever-put-all-your-eggs-one-broker.html , do not put all your money with just one broker. Be selective by choosing them.

If your broker goes bankruptcy, all accounts will be closed and during that period your positions are open. If you then want to close them during that time, you have to open an other account with an other broker and place again enough money there to secure your margins. During the time of this transaction, you take the full risk of any loss which occurs.

To avoid such situations, always have at least two accounts with two different brokers.

If the broker got bankrupt, you usually also will loose some or maybe all of your money you placed there, as there is a reason for his bankruptcy.

As you see in the other thread, I faced two times such a situation. The last actual bankruptcy in the States was from PFG (Peregrine Financial Group). http://www.foxbusiness.com/industries/2012/07/11/pfg-collapse-deals-blow-to-futures-industry/ in which I luckily not have been involved as we checked the company shortly before this was announced. The company was locked at because of his great platforms for option trading and the seriousness it showed to the outside world. What a bluff it was, as the owner cheated for many years and nobody saw it. So be careful with any broker you choose, even in India !!

Good trading and lets hope that nobody must suffer such bad experiences.

DanPickUp

 

[megapixel]

Re: how to avoid loss ?

Dear Megapixel
If you then want to close them during that time, you have to open an other account with an other broker and place again enough money there to secure your margins.

Hi Dan
Thanks for the post.


NIFTY F&O positions are attached to broker's account id....trading in other broker's account id would be considered as different trades ....is not it ?

 

[DanPickUp]

Re: how to avoid loss ?

Hi Dan
Thanks for the post.


NIFTY F&O positions are attached to broker's account id....trading in other broker's account id would be considered as different trades ....is not it ?

Yes, at least that is the way it works in the States.

For example: If I buy Nov 5600 put with broker A and at the same time I buy also Nov 5600 put with broke B, that would be two separate trades and if I would short them vice versa, then my margin has to be placed with both brokers. I then have one position with broker A and one with broker B.

Now, if one broker is "Out of work", you tell your other broker that you have this and that position open and he will ask you to place first the margin for all that positions and then he will take over the position in his name and will execute them for you. So keep book and keep any document which shows clearly your current position in the market by your self, so you can act quickly when needed.

After the broker is "Out of work", the lawyers will take over the company and then the accounts will be checked and transferred to other brokers, even to the one you want. But this can take time and as told: No guarantee for the cash you had with such a broker.

DanPickUp

 

[megapixel]

Re: how to avoid loss ?

Yes, at least that is the way it works in the States.

For example: If I buy Nov 5600 put with broker A and at the same time I buy also Nov 5600 put with broke B, that would be two separate trades and if I would short them vice versa, then my margin has to be placed with both brokers. I then have one position with broker A and one with broker B.

Now, if one broker is "Out of work", you tell your other broker that you have this and that position open and he will ask you to place first the margin for all that positions and then he will take over the position in his name and will execute them for you. So keep book and keep any document which shows clearly your current position in the market by your self, so you can act quickly when needed.

After the broker is "Out of work", the lawyers will take over the company and then the accounts will be checked and transferred to other brokers, even to the one you want. But this can take time and as told: No guarantee for the cash you had with such a broker.

DanPickUp

looks interesting.... not sure whether this happens in our land.

in which I luckily not have been involved as we checked the company

What to check for such fraudster companies ?

 

[DanPickUp]

Re: how to avoid loss ?

looks interesting.... not sure whether this happens in our land.


What to check for such fraudster companies ?

Looks interesting??

This is not interesting: This is bad and it seems you never ever experienced it!!

 

[megapixel]

Thanks Dan, for sharing your experience. This helps .

I need one help regarding Option Strategy.

Can you please suggest few popular Option Strategy names which does not involve Short Selling ?

I don't like Short Selling stuff (just don't feel comfortable)....though I know those are excellent tools.

I just want to know few Strategy names which does not involve Short Selling . I'd would go through strategy details by myself.... Will it be possible to tell few such names ?