Guaranteed Stops and are they worth it?

Discussions about Money Management and Risk Control.
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awoodj
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Guaranteed Stops and are they worth it?

Post by awoodj » Thu Apr 21, 2011 4:44 am

I have this to look at on my to do list but would be interested if anyone has already investigated.

I am considering researching the impact of guaranteed stops which are available when using a Spread Betting account. These come at a premium of increased spread but allow you to fix a known price where you can exit the trade. My thinking is that by doing so you can possibly trade more aggressively on the basis that a "Price Shock" will not be an unknown loss as can happen if markets gap hugely on some world event such as 911 type thing etc.

Moto moto
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Post by Moto moto » Fri Apr 22, 2011 9:33 pm

On some of those make sure you read the fine print, as I have seen variations.
Some use an option to guarantee the stop, which is the extra premium and can get quite expensive.....others guarantee the stop ONLY if it was possible to exit at the level.
eg; if there is a gap through the level where it would have been completely impossible to trade, then the stop may only be honored at the first traded price (better than nothing maybe, but not necessarily what you think it may be)

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