Mostrar Mensagens
41
Comunidade de Traders / Re: Mercado em TEMPO REAL - Notícias, rumores, análises, chat.
« em: 2020-05-08 21:00:04 »
One Trader Started The Day With $77,000 In His Account; By The End He Owed $9 Million
The April 20 historic oil price crash that sent the prompt May WTI contract plunging to the unheard of price of negative $40 per barrel now seems like ancient history with oil back in the $20s (at least until the June contract matures in 10 days) and stocks are delightfully levitating, but to one trader what happened on that fateful Monday will remain a permanent scar of how everything can go terribly wrong in the blink of an eye.
Syed Shah, a 30-year-old daytrader, would usually buy and sell stocks and currencies through his Interactive Brokers account, but on April 20 he couldn’t resist trying his hand at some oil trading. Shah, working from his house in a Toronto suburb, figured he couldn’t lose as he spent $2,400 snapping up crude at $3.30 a barrel, and then 50 cents. Then came what looked like the deal of a lifetime: buying 212 futures contracts on West Texas Intermediate for an astonishing penny each.
What he didn’t know, as Bloomberg's Matthew Leising reports, is that oil’s first plunge into negative pricing had broken the Interactive Brokers platform, because its software "couldn’t cope with that pesky minus sign, even though it was always technically possible for the crude market to go upside down."
As a result, crude was actually trading at a negative $3.70 a barrel when Shah’s screen had it at 1 cent; the reason: Interactive Brokers never displayed a subzero price to him as oil kept diving to end the day at minus $37.63 a barrel.
At midnight, Shah some very bad news: he owed Interactive Brokers $9 million. He’d started the day with $77,000 in his account, expecting that his biggest possible loss was 100%, or $77,000.
It turned out to be 116 times that number.
"I was in shock," the 30-year-old told Bloomberg in a phone interview. "I felt like everything was going to be taken from me, all my assets." Not that Shah had anywhere remotely close to $9 million in assets.
Shah was not alone. Countless investors, especially retail daytrades on RobinHood who had followed every tick lower in the USO by buying more of the ETF in hopes of an rebound, had a brutal day on April 20 regardless of what brokerage they had their account in.
What set Interactive Brokers apart is that its customers were flying blind, unable to see that prices had turned negative, or in other cases locked into their investments and blocked from trading. Adding insult to injury, Bloomberg reports that a big reason why Shah lost an unbelievable amount in a few hours, is that the negative numbers also blew up the model Interactive Brokers used to calculate the amount of margin - aka collateral - that customers needed to secure their accounts.
Commenting to Bloomberg, Interactive Brokers chairman and founder Thomas Peterffy, said the journey into negative territory exposed bugs in the company’s software. “It’s a $113 million mistake on our part,” the 75-year-old billionaire said in an interview Wednesday. Since then, his firm revised that loss estimate down to $109.3 million. It’s been a moving target from the start; on April 21, Interactive Brokers figured it was down $88 million from the incident.
The good news for Shah and countless others like him is that customers would be made whole, Peterffy promised. "We will rebate from our own funds to our customers who were locked in with a long position during the time the price was negative any losses they suffered below zero."
While IB struggles to resolve the loose ends from the historic plunge, this is how Shah ended up owing millions.
https://www.zerohedge.com/energy/one-trader-started-day-77000-his-account-end-he-owed-9-million
The April 20 historic oil price crash that sent the prompt May WTI contract plunging to the unheard of price of negative $40 per barrel now seems like ancient history with oil back in the $20s (at least until the June contract matures in 10 days) and stocks are delightfully levitating, but to one trader what happened on that fateful Monday will remain a permanent scar of how everything can go terribly wrong in the blink of an eye.
Syed Shah, a 30-year-old daytrader, would usually buy and sell stocks and currencies through his Interactive Brokers account, but on April 20 he couldn’t resist trying his hand at some oil trading. Shah, working from his house in a Toronto suburb, figured he couldn’t lose as he spent $2,400 snapping up crude at $3.30 a barrel, and then 50 cents. Then came what looked like the deal of a lifetime: buying 212 futures contracts on West Texas Intermediate for an astonishing penny each.
What he didn’t know, as Bloomberg's Matthew Leising reports, is that oil’s first plunge into negative pricing had broken the Interactive Brokers platform, because its software "couldn’t cope with that pesky minus sign, even though it was always technically possible for the crude market to go upside down."
As a result, crude was actually trading at a negative $3.70 a barrel when Shah’s screen had it at 1 cent; the reason: Interactive Brokers never displayed a subzero price to him as oil kept diving to end the day at minus $37.63 a barrel.
At midnight, Shah some very bad news: he owed Interactive Brokers $9 million. He’d started the day with $77,000 in his account, expecting that his biggest possible loss was 100%, or $77,000.
It turned out to be 116 times that number.
"I was in shock," the 30-year-old told Bloomberg in a phone interview. "I felt like everything was going to be taken from me, all my assets." Not that Shah had anywhere remotely close to $9 million in assets.
Shah was not alone. Countless investors, especially retail daytrades on RobinHood who had followed every tick lower in the USO by buying more of the ETF in hopes of an rebound, had a brutal day on April 20 regardless of what brokerage they had their account in.
What set Interactive Brokers apart is that its customers were flying blind, unable to see that prices had turned negative, or in other cases locked into their investments and blocked from trading. Adding insult to injury, Bloomberg reports that a big reason why Shah lost an unbelievable amount in a few hours, is that the negative numbers also blew up the model Interactive Brokers used to calculate the amount of margin - aka collateral - that customers needed to secure their accounts.
Commenting to Bloomberg, Interactive Brokers chairman and founder Thomas Peterffy, said the journey into negative territory exposed bugs in the company’s software. “It’s a $113 million mistake on our part,” the 75-year-old billionaire said in an interview Wednesday. Since then, his firm revised that loss estimate down to $109.3 million. It’s been a moving target from the start; on April 21, Interactive Brokers figured it was down $88 million from the incident.
The good news for Shah and countless others like him is that customers would be made whole, Peterffy promised. "We will rebate from our own funds to our customers who were locked in with a long position during the time the price was negative any losses they suffered below zero."
While IB struggles to resolve the loose ends from the historic plunge, this is how Shah ended up owing millions.
https://www.zerohedge.com/energy/one-trader-started-day-77000-his-account-end-he-owed-9-million
