Example: Selling Light Crude Oil

Limited Risk protection is also available on all our Oils and Metals markets.

This can be especially useful as the underlying markets often operate a system of price limits. Limited Risk protects you against the possibility of being locked into mounting losses should the market go 'limit down' or 'limit up'.

Opening the position

You think that the price of Crude Oil is set to fall but you want to limit your potential downside. So you decide to sell two contracts of the November Light Crude Oil with Limited Risk protection (one contract is the equivalent of $10 per cent).

Our quote for November Light Crude Oil is 7101/7110. With Limited Risk transactions, all the spread is charged on the opening. Our price without dealing spread is 7097/7098. Your position is opened at 7097 minus 8 (all the normal spread) minus 4 (the Limited Risk premium) = 7085.

Placing the Guaranteed Stop

Your position is opened at 7085. You decide to put your Guaranteed Stop at 7142. So the most you can lose on your position is:

Maximum possible loss

Triggering the Guaranteed Stop

A few days later, OPEC announces an unexpected reduction in output of crude oil, and the price of Light Crude jumps suddenly from 7100 to 7303. Your position is automatically closed at 7142. You have lost $1140, but the Limited Risk protection has saved you from a far bigger loss.