Will I always be able to close an open spread bet?

[Guest JTN]

Hi

 

I appreciate that due to market liquidity, IGIndex's risk policies, etc. that sometimes I will not be able to place a buy or sell order for a spread bet.  My question is if I have an open position already will I always be able to close it when I want to or will there sometimes be conditions which will prevent me doing this?  If so what are these?

 

Thanks,

 

John

[Caseynotes]

Excellent question and the reality is NO unless you have a guaranteed stop. Liquidity is the key, to get out of a long position there must be someone willing to take that contract off you, same with a short position. If the market is in freefall there will be no liquidity and you are stuck with it. IG has become more sensitive concerning risk because though these 'black swan' events are rare crypto is clearly a high potential candidate. In 2015 the SNB removed the swissie/euro peg and price plunged 2000 pip in minutes, some people in the market with a 5 grand account and a 20 pip stop suddenly found themselves owing IG over 200 grand. IG had to write off many of those losses and that's when they introduced the guaranteed stop and the tied statement "losses can exceed account deposit". A similar though not as catastrophic black swan event occurred during the night of the Brexit referendum. I watched both these events live on screen and it was clear anyone trapped was just a passenger.     

[JamesIG]

Hi  - Thanks to  for giving an in depth reply. I just thought I'd probe for a bit more information so I can best answer your question. Which market are you specifically looking at trading?

 

Caseynotes in right in saying that market liquidity is the most important aspect when closing a deal, however there are a number of nuances which this can relate to. For example if you trade a small cap stock that trades exclusively with a market market and you are looking to sell to close, the market maker may not want to take up your sell order and in this order you won't be able to offload anything. Sometimes you may have a large position in a liquid stock however you mat not be able to close your full position at an exact level if the volume just isn't there. 

 

Sometimes, as correctly pointed out, over black swan events such as the SNB, even multinational banks pull liquidity which causes the bottom to fall out of the market and you are stuck with a position. It's also worth noting that just because on the charts a market ticks at a certain price, it won't have infinite liquidity at that price. Other times the markets may simply be closed on IG (for example you can't trade USD crypto from 10pm Friday until 8am Saturday). 

 

Guaranteed stops are certainly an option, so if you can give me a little more info about your query and hypothetical trade I'd be able to give a better answer. 

[Guest Curious cat]

Can a spreadbet go below zero and will the liability continue indefinitely if unable to close?