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Hello Forum,

I thought I would start a new question about Knock Outs.  I searched and found a quick discussion back in August last year but that didn't answer my question.

So - I've read the IG instructions/help and it talks about the knock out level, but not about the expiry time. 

Is there a time when it expires?  How long?  What does it mean when it expires?  I think I have an idea but wanted to be sure.  If I had a loss say, but am still in the ring and haven't been knocked out, my position would..... (be closed for a loss I assume).

That's a negative unless this "expiry time" is reasonable.  I am assuming they are meant for longer-term trading?  I assume that because the very helpful @JamesIG said that you can't change the knock out level once you've put on the trade.  In the future they will offer different knock outs apparently.  We are the future since that post, but ? I don't know if they have tweaked that yet.

I should investigate the premium v a guaranteed stop.  

Anyway, there seems to be a small niche use for these knockouts.  (I have run them by a friend).  It might be obvious to everyone else but anyway.  

Thanks if anyone knows about the timing of them.  Cheers.

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Posted (edited)

@OceansJess, I should have also mentioned that on expiry any loss or gain must be realised as the position is closed automatically. With the long expiry you can sit on a loss for a long period if you think the market will turn around and that unlike the binaries you can close the position yourself at any time.

Edited by Caseynotes

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I'm starting to think IG is a bit of a front - cannot believe it.  

Ok - been getting my hands dirty with some knockouts, and initially was happily given $500 per point.  

Then after a decent loss (knockout level too close)  and a few more trades which I had to close in a short period of time because I was wrong in my prediction - the passive aggressive people behind the scenes have done something and now I don't get filled but get a message saying try the advanced options.  There are no advanced options - that I can find.  

Does anyone else get this special treatment, or know how to chose these advanced options?  

Why offer a product, which by the way is heavily structured in their favour, then annoy clients who are using it legitimately??   

Thanks if any traders know about these "issues".

Jess

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Just to add - I did have a setting "accept partial fills" as my default setting.  I have since changed the "setting" which shows these options in the deal ticket.  So I can see them now.  However I did have the setting "accept partial fills" already ticked.

That means something seems dodgy if you ask me.

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Posted (edited)

Honestly, I have not yet understood the difference between trade a barrier option and buying/selling a future.

I don't see any novelty in this product compared to a cfd or a future.

I mean, I buy a cfd on the dax and put in a stop loss, that's it!


Why should I use a barrier option to do the same thing?

 

Edited by maurizio999

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Posted (edited)
On 22/03/2019 at 01:35, OceansJess said:

Hello Forum,

 It might be obvious to everyone else but anyway. 

 

Not to me ...

I see no difference between this kind of instrument and online gambling/casino/poker.  But at least the latter have some entertainment value.

This kind of stuff is a million miles away from investing and it should be illegal for providers to use terms like 'trade' in relation to them.  It should be PLACE YOUR BETS.

Edited by dmedin

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One of the main advantages of KO options is in regards to the cost basis of the trade you would like to enter.

The premium paid on a KO is equal to your max loss. If your max loss is less than the margin required for a CFD or spread bet then you will have more capital left over to put towards another trade.

The static stop-loss lifts a fair amount of the psychological pressure from the position and forces the trader to stick to the plan. If you are someone who constantly moves your stop-loss then you need to go back to the drawing board and make a better trading plan.

I'm not sure how one could consider a KO option to be gambling but not CFDs or Futures. As it has already been pointed out that they all achieve the same result. Using KOs means that your strategy has defined risk, which makes them technically less dangerous than the other asset classes, especially considering the fact that there are traders that don't even use stop-losses...

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I don't understand 'KOs' at all, nor binary options.

So your argument is that it prevents you modifying your stop loss.  Oh great.  :D

I can almost get my head around SB on options, but KOs, I cannot understand at all. 

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Adding as unable to edit: I am more than happy to be proved wrong, but I suspect nobody will ever post a demonstration of a successful use of KO.  If there is anyone out there who is able to be consistently profitable using these things then they will be far too discrete to reveal it and they certainly won't be posting on here ;)

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@dmedin

When I first opened my account it was a "limited-risk account". This meant that every trade needed to have a "guaranteed stop" set 1000 points away or so. The amount of margin required for each trade was also quite substantial at that time. KO options didn't enable me to do anything that I couldn't achieve with vanilla spread betting, but the initial cost was cheaper. With KOs I could have 3 or 4 trades for every 1 spread bet (with the same risk:reward profile. aka, win or lose - the max profit/loss would be the same with either), meaning my money would go further.

I can't say for sure, but I'd imagine that the overnight holding cost on an option is cheaper than a position where you are borrowing money (using leverage). That's maybe something worth looking in to if you plan on opening longer term positions.

Options have always been tools for hedging risk so they perhaps appeal to people who have large equity positions but want to limit their exposure in times of uncertainty (like trade wars, Brexit, interest rate announcements, etc.) without simply closing all their trades. Now when you compare KOs to regular options it is easy to se a whole host of benefits.

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  If there is anyone out there who is able to be consistently profitable using these things then they will be far too discrete to reveal it and they certainly won't be posting on here

If anyone is consistently profitable trading anything at all I don't see why they wouldn't consistently profit with KOs. The idea that someone can profit with spread betting but not CFDs is also just as laughable. 

Why would anyone want to share that they are consistently profitable in the first place. To be profitable one needs an edge in the market, the more people who know that edge the less it will work and in some cases it will be exploited. A good example of this is how large institutions can easily hunt stop-losses to get better fills on their own large orders because most of retail follows the principles of support & resistance and tight stops. 

Between 2016-17 if you simply bought SPX (US500) 2-3mins before market close and sold right at market open the next day you would have been up over 500% for the year. How long do you think that would have been the case if you told all your friends and strangers on the internet?

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