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Why does a guaranteed stop have excess margin requirements?


Funymoney

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I've mainly traded UK shares for the last 15 years. I'm doing more indexes at the moment. If I have £1 point guaranteed stop 300 points on Wallstreet the margin requirements is £1060.71.  What does this mean if I hit the stop? Usually, I would assume loss of £300 plus stop premium. I haven't noticed anything extra where stops have been hit, but in extremis i.e. index lock up for 15 minutes leading to a gap down, would I lose the £1060.71? if not, should I be taking any notice of the higher figure on guaranteed stops?

 

Thanks in advance

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5 hours ago, Funymoney said:

I've mainly traded UK shares for the last 15 years. I'm doing more indexes at the moment. If I have £1 point guaranteed stop 300 points on Wallstreet the margin requirements is £1060.71.  What does this mean if I hit the stop? Usually, I would assume loss of £300 plus stop premium. I haven't noticed anything extra where stops have been hit, but in extremis i.e. index lock up for 15 minutes leading to a gap down, would I lose the £1060.71? if not, should I be taking any notice of the higher figure on guaranteed stops?

 

Thanks in advance

Thanks for your post. 

Your maximum loss will be the (£ per point x guaranteed stop distance) + CR premium. 

A regulation was enforced last year requiring those that use guaranteed stops to put down the guaranteed stop margin or (price x size x margin factor), depending on which is larger. 

Please note the loss you calculated is still the maximum you can lose. 

All the best. 

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