ESMA margin changes

FXX

Experienced member
1,158 198
No, FXX, all you're hoping for is a dramatic movement away from current price, the more dramatic the better. If the move is not enough to cause closure of the losing side of the straddle, you've lost nothing barring the costs of opening two positions. With a simultaneous long and short of equal sizes, the loser is stopped out or closed by a margin call or whatever - but ESMA's NBP rule now means that if all closure mechanisms fail and price continues in its initial direction, you can still only lose your deposited funds from the losing account while the winner grows without restriction.

So is this a way to play an upcoming event that generates extraordinary volatility, like NFPR's?

I won't be doing this but someone will - why won't it work?
I just think it's one of those strategies that look good on paper but difficult to execute. Assuming you are referring to NFP, like all news the sentiment can change in a blink of an eye where you might have a super employment number but weakening wages. This sort of outcome happens fairly regularly and will whipsaw price to extremes in both directions. So you might just close the losing side only to realise that it would have become the winning side but now it's closed and you have doubled your losses.
 

tomorton

Legendary member
8,059 1,181
I just think it's one of those strategies that look good on paper but difficult to execute. Assuming you are referring to NFP, like all news the sentiment can change in a blink of an eye where you might have a super employment number but weakening wages. This sort of outcome happens fairly regularly and will whipsaw price to extremes in both directions. So you might just close the losing side only to realise that it would have become the winning side but now it's closed and you have doubled your losses.

Absolutely - been there, done that...........
 

counter_violent

Legendary member
10,329 2,700
No, FXX, all you're hoping for is a dramatic movement away from current price, the more dramatic the better. If the move is not enough to cause closure of the losing side of the straddle, you've lost nothing barring the costs of opening two positions. With a simultaneous long and short of equal sizes, the loser is stopped out or closed by a margin call or whatever - but ESMA's NBP rule now means that if all closure mechanisms fail and price continues in its initial direction, you can still only lose your deposited funds from the losing account while the winner grows without restriction.

So is this a way to play an upcoming event that generates extraordinary volatility, like NFPR's?

I won't be doing this but someone will - why won't it work?
In theory it does work......but with most large directional moves comes increased volatility and it's that increased volatility that could kill both sides.
 

Morris

Well-known member
297 2
I contacted my broker and applied for professional status on the grounds that:

a) I spent several years working in the City, on equity funding systems, risk calculation & options.

b) I have made over 600 CFD trades in the previous 4 quarters. Well into 7 figs.

Nevertheless, I have been refused professional status.

Not really a game changer for me as I mainly trade stocks & have sufficient funds in the account, but just curious to know how others got on...
 

FXX

Experienced member
1,158 198
I contacted my broker and applied for professional status on the grounds that:

a) I spent several years working in the City, on equity funding systems, risk calculation & options.

b) I have made over 600 CFD trades in the previous 4 quarters. Well into 7 figs.

Nevertheless, I have been refused professional status.

Not really a game changer for me as I mainly trade stocks & have sufficient funds in the account, but just curious to know how others got on...
did they give you a reason why. you meet the 2 required of 3 criteria to become classified as one?
 

Morris

Well-known member
297 2
They told me 'your internal trade history with us doesn't meet the first criteria...'

Not sure what that means.

To be honest I haven't taken it further as the changes haven't really affected my trading.
 

FXX

Experienced member
1,158 198
They told me 'your internal trade history with us doesn't meet the first criteria...'

Not sure what that means.
I would raise this with more senior people at the broker.My stupid now ex broker reduced my leverage to 2:1 and cited the first line in the margin breakdown as their proof (from 30:1 to 2:1). After taking it up with the CEO they corrected the mistake and gave me £100 but it was too late for them. Sounds to me like some mudflap doesn't know that you only need 2 of the 3 to be classed as pro.
 

kalott

Established member
696 64
They told me 'your internal trade history with us doesn't meet the first criteria...'

Not sure what that means.

To be honest I haven't taken it further as the changes haven't really affected my trading.
IG (version)

"Trading experience: You must have placed 40 trades of significant size in the last year. Significant size is £10,000 notional for equity trades and £50,000 for everything else. Buying £10 of FTSE and then closing it counts as one single trade. You do not need to have made the trades with IG. "

https://www.ig.com/uk/help-and-support/accounts-and-statements/my-accounts/what-is-a-professional-client-and-how-do-i-become-one
 

tomorton

Legendary member
8,059 1,181
I'm ineligible for pro status with my SB firm but I'm wondering about forward requirements in order to retain the pro account. These haven't been mentioned yet as far as I know but I wonder if as well as historic records provided on application, you will at some point need to submit more up to date evidence to keep this level of account? Like you still have a £500k portfolio, and you still run frequent significant trades? And what happens when your last involvement in the financial sector was 15 years ago, or 30, or 40?
 

FXX

Experienced member
1,158 198
this has me wondering if i will get it (eventually). I have industry experience but i need to get my trade size up enough to meet 2 of the 3. This story shared by Morris has me wondering but for now i think it is incompetence.
 

pigbear

Member
56 3
The other way of increasing your margin is maxing out on your credit card. You had £2000 which now has the power of £200 so you need to increase it by £18000. If your credit history is fine then you could split the £18000 across say 3 cards. Currently some cards are offering 6% Apr so that equates to 0.5% on the amount every month. Also you would have to price in the 3% fee on the first month so possible £720. You would have to pay off 2% of this amount monthly.
P.S. the above is not recommended except for the gamblers out there!
 
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