Advice - May 6 Market Spike

[onmargin]

Just wondering if anyone has any advice for me as I have never had anything like this happen. I had a QID position open (quite profitable too) with a stop @ 11.20. During yesterday's market spike, QID correlated the wrong direction and traded at 2.50 for less than a minute. I was stopped out at $11 and took a massive loss.

Do I have any recourse? Not only was this market spike suspicious, but the instrument correlated the opposite direction that it should have (it should have spiked up if anything). Thanks for any comments.

 

[dcraig1]

You should contact your broker immediately. The longer you leave it, the weaker your position becomes.

Some stock trades have already been busted according to a bulletin from InteractiveBrokers:

"IB has received notice from the venues listed below of their intent to cancel all stock trades executed between 14:40:00 and 15:00:00 which were executed at a price greater or less that 60% away from the consolidated last print in that security at 14:40:00 or prior. Each has also provided notification that this decision cannot be appealed. While we continue to await confirmation from all venues as to which stocks are affected and the break points at which the cancellations will take place, it now appears likely that the information will not be delivered within the timeframe necessary to be posted to your account until the morning. It should also be noted that IB has received no notice from the U.S. option exchanges or futures exchanges as to whether or not they intend to take similar action."

 

[ukdaytrader]

Might be tricky on a stop unless the stop was 60% away from the price at 14:40. Im pretty sure a lot of people will have lost a lot of money.

 

[onmargin]

Might be tricky on a stop unless the stop was 60% away from the price at 14:40. Im pretty sure a lot of people will have lost a lot of money.

That is what my broker said as well. Unless the loss is greater than 60%, I am out of luck.

Lessons learned.

1) Find a new broker.
2) Never touch ETFs that don't directly correlate ever again.
3) Be careful with stops. (stop was placed to protect me from a catastrophic move, not expose me to one)

 

[bigal60]

Hi

I'm a new member and have only been trading 2 weeks. I also fell foul of yesterday's 'anomoly' on the SP500 - fortunately for me I only lost £10; I imagine it will have hurt a lot of people - who could have anticipated a 60/70 point 'spike' over such a short period?

Regards

BigAl

 

[onmargin]

Ya it hurts. Over $20000 USD lost here. What makes it even more unfair, is that the instrument in question (QID) didn't even correlate in the correct direction. Being an inverse fund, it should have spiked up, not down.

 

[DionysusToast]

onmargin - if I read it right, your stop was at 11.20 but you actually got stopped out at 11.00. That's 20c slippage. That wouldn't normally be an issue - but your stop placement looks a bit off...

Looking at this chart - QID on top QQQ on the bottom, I would hazard a guess that you entered this trade when the market started to drop, trying to capitalize on the move.

It looks like you got caught out when the market was back on it's way up. I would agree that this price spike looks odd but I would bet that if you looked into their literature, you will probably find out why. These ultra-shorts can go to zero in a day - this is not generally going to happen on a QQQ ultra short but on something based on a more volatile market it's possible.

So - I think the spike is very large, I think it was actually in the right direction - Qs had an up bar, QID had a down bar. I would be poring over the ETF documents to see if this spike is against their 'rules' so to speak.

I have to say - without knowing all the details, it seems to me that your stop loss placement - which is probably at least $6 from your entry point (that's my guess) is the real problem. It is a real shame it got hit - in this case, your stop loss was worse than no stop loss.

I would have a chat with your broker - they are cancelling trades and they might cancel yours on the basis that the price move from $17 - $5 is larger that the 60% being quoted. From the letters I've seen from the market - there is going to be 'en-masse' trade reversals and there's a chance that yours will be one, regardless of the fact your stop loss was where it was. I think this will be on the bases of the move to $5, not on the move past $11.

I sincerely hope you get lucky on this one. If so - promise us you won't ever do that with a stop again ! :clover: :clover: :clover:

 

[bigal60]

My knowledge of trading is very limited at the moment so I'll take your word re "it should have spiked up, not down". I'm with IG index and whatever the outcome of any possible investigations I doubt if there will be any compensation - hope I'm wrong. Lots of unhappy people around at the moment I imagine! Regards,
BigAl

I

 

[DionysusToast]

If you are trading with a spread betting company, then I doubt you'll have much luck.

I had rather presumed the trade had been placed with a legit broker. The NASDAQ, NYSE, AMEX may be reversing trades but I would not hold out any hope of a spread bet company doing the same - unless of course, the reversal will line their pockets more than yesterdays spike did.

 

[ukdaytrader]

Count yourself lucky!! If it wasn't a spike and a permanent move and they allowed you to go over your stop you could have been looking at $200k down not $20k down.

 

[DavidS]

What happens to the people on the other side of these trades?

Do they have their massive profits taken away from them? There must be a ton of trend followers who were already short into that spike - must have thought all their Christmases had come at once, assuming they reacted fast enough.