Guaranteed stop loss

This is a discussion on Guaranteed stop loss within the First Steps forums, part of the Reception category; Originally Posted by Brumby The same way insurance companies make money. They pool the premiums against risk events based on ...

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Old Nov 18, 2017, 3:20pm   #16
 
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Originally Posted by Brumby View Post
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.
Yep, that was my guess as well... there is no free lunch unfortunately...
Also you can do something similar hedging with stock options...
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Old Nov 18, 2017, 4:21pm   #17
 
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Yep, that was my guess as well... there is no free lunch unfortunately...
Also you can do something similar hedging with stock options...
Well certainly there are no free lunches in trading but I regard IG's offering as a bit of a free snackette -it would only be used in anger (Black Swan/massive gap) and only pay the premium if it's executed – it's a win-win for me.
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Old Nov 18, 2017, 5:22pm   #18
Joined Feb 2002
I'm wondering if a GS isn't a tool for actively targeting Black Swans - stocks BEFORE earnings announcements, forex pairs BEFORE bank rate decisions etc. Anyone doing this?
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