limit down on black swans ?

Discussion in 'General Discussion' started by tei, Nov 20, 2016.

  1. tei

    tei Member

    Hi All,

    The recent limit down in ES futures due to the presidential election triggered some questions and I would like to seek clarifications on the following scenarios.

    1) Does indices have their own limit down triggers ? or limit down only applies to futures ? Meaning when futures (eg ES) encounters limit down during market trading hours, are we still able to trade SPX, or it will be limit down together with ES as well ?

    2) If a black swan event happened before market open, and futures market (eg ES) is limit down TWICE, and price hovers between 1st and 2nd limit down region when market finally open. Will SPX price trade immediately around this corresponding region when it opens, or will it trigger its 1st limit down first, before going to proceeding to the future price region ?

    3) Are we still able to buy and sell SPX options and ES options when ES futures encounters limit down during market trading hours ?

    Many thanks in advance,

  2. ACS

    ACS Well-Known Member

  3. tei

    tei Member

    Hi Ace,
    Thanks very much for helping out. Appreciate it.

    So it seems that outside of market trading hours, futures are only allowed limit up/down max of 5%. This limit for futures will be extended to 7%, 13% and 20% once trading hours starts so as to be in line with indices such as SPX.

    Any idea if these limit up/down applies to the options market as well ? Meaning if trading of futures or indices are temporarily halted due to circuit breakers, are options are the corresponding underlying still open for trading, or are they halted as well ? I have no experience in this area.

  4. tom

    tom Administrator Staff Member

    Hi Gary. I deleted that user and his post. :)
  5. garyw

    garyw Well-Known Member

    Thnx Tom.
  6. tei

    tei Member

    By the way, this query is not directed to Ace only. It is open to everyone to share. :). Thanks again.
  7. Paul Demers

    Paul Demers Well-Known Member

    I fear that long before the market hits limit down that options will become untradeable. For an example see what the bid ask spreads in the SPX were at the open on Aug 24th 2015.
  8. tei

    tei Member

    Paul, thanks. Happy Thanksgiving.

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