Guaranteed stop loss

Originally Posted by Brumby

A guaranteed stop loss is what is implied in the wording. It does come at a premium because you are buying insurance. Whether it is legally enforceable is probably unknown because you will have to read the fine print of the contract in special event like SNB where some brokers claim force majeure. Normally I suppose it would be a non issue.

Small premium 0.7% only payable if the stop is exercised. Not aware of any force majeure restrictions. Sometimes not available if you are shorting.


Whether you need to buy insurance or not depends on whether you have an insurable interest and that varies between individuals and their circumstance. I have used it only once in 17 years but that single event was only to test out the process out of curiosity. Once you invoke the guaranteed stop it is only valid at the price level set. Should you move your stop, the guarantee disappears with it unless you buy another guaranteed stop.

Once invoked, it can be moved in the direction of a profiting trade i.e. trailed with the guarantee remaining. Unable to specify any other stop.


My single experience was with CMC but that was with stocks.

Since you are starting out, you have a long list of things you need to learn about risk and money management. Guaranteed stop is way down the list.

Originally Posted by sminicooper

Helpful input from Brumby. My added remarks (blue text) are in the context of a not particularly short-term trend trader using IG's facility.

The overwhelming advantage as far as I'm concerned is that I can define my total risk – one of the few things over which I have control. I think of it as a hard stop that I don't expect to be executed – I have a soft stop much closer – but is there in the event of a Black Swan event. IG normally specify minimum stop distance of 10% but occasionally larger which might make the trade impractical – no problem, just move on and trade something else; and think why IG want to limit their guarantee on that particular instrument!

For my type of trading it's low cost insurance that enables me to sleep easy.

Originally Posted by sminicooper

Helpful input from Brumby. My added remarks (blue text) are in the context of a not particularly short-term trend trader using IG's facility.

The overwhelming advantage as far as I'm concerned is that I can define my total risk – one of the few things over which I have control. I think of it as a hard stop that I don't expect to be executed – I have a soft stop much closer – but is there in the event of a Black Swan event. IG normally specify minimum stop distance of 10% but occasionally larger which might make the trade impractical – no problem, just move on and trade something else; and think why IG want to limit their guarantee on that particular instrument!

For my type of trading it's low cost insurance that enables me to sleep easy.

Originally Posted by Quantt

I am frankly not sure how this works for the Broker - it's a sure way to lose a lot of money quickly... Let's say tomorrow the market opens and I am 50% down and my guaranteed stop was only 5% down, they have to cover the 45% loss and charge me only 0.7% total if I exercise it...

This looks like amazing deal, especially the fact they'll charge me only if the event actually happens... too bad my brokers are not offering this...

Originally Posted by FXX

I believe it is only viable for spread betters from a business model perspective because they take the other side of the trades without hedging for the average trader. I would be interested to know if a normal broker offers this. It isn't something I would use.

Originally Posted by Quantt

I am frankly not sure how this works for the Broker - it's a sure way to lose a lot of money quickly... Let's say tomorrow the market opens and I am 50% down and my guaranteed stop was only 5% down, they have to cover the 45% loss and charge me only 0.7% total if I exercise it...

This looks like amazing deal, especially the fact they'll charge me only if the event actually happens... too bad my brokers are not offering this...

Originally Posted by Brumby

The same way insurance companies make money. They pool the premiums against risk events based on actuarial calculations.

My single experience was with CMC and that was more than 10 years ago. The cost for a guaranteed stop once invoked is incurred regardless of whether it is triggered. Every single change to the stop is a new insurance event and cost is incurred. I don't believe there is any insurance out there that you only incur a premium conditioned upon an actual claim. Every insurance company will go broke.