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Comment by socrates1998 | Hacker News Reader

socrates1998

If you don't know what is going on, then why on earth would you risk so much money?

IB fucked up, no doubt, but these idiots are trading shit they know nothing about.

Don't trade on margin.

Well, yeah, it's reasonable to expect investors to appropriately researching something before buying, and be cognizant of the risk that it could crash.

It's not reasonable for them to expect to deal with a platform that misrepresents the state of the market and executes trades at a non-market price, as was happening here. (It was telling them the oil futures still had a positive price when it was negative, and making them pay on that basis.)

> Well, yeah, it's reasonable to expect investors to appropriately researching something before buying, and be cognizant of the risk that it could crash.

Is it? Isn't this the entire reason risk management departments exist?

I don't think they knew in this case they were potentially trading on margin. The broker didn't know either which is crazy.

If anyone is trading futures and did not know they were trading on margin or trading highly levered instruments then they either are trading on a platform that has zero compliance or they misrepresented themselves as an investor.

The broker calculated the margin requirements based on the assumption that the price could not go negative. So the investors thought they were risking $30 per contract when it was actually a couple orders of magnitude larger than that.

Effectively the broker lied to them about how leveraged they were.

Anyone who thought they were risking a max of $30/contract has no absolutely no business trading futures. Most of them are 1000bbl contracts and the disclosure docs that you read before being granted trading enablement are crystal clear. The margin required to be posted is not the limit of what you can lose. (If it was, margin calls would be much less of a thing.)

The margin is a measure of how much you might reasonably expect to lose. IB was clearly miscalculating it.

IB asked for very low margin, $30 per contrat for long positions, normal is around $8000. Margin for futures is based on risk. They could perfectly thought that minimum price was 0.01, and that was what IB was telling to them.

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