Crude Oil Trading Limits

[The Bear]

Can someone explain why crude oil (CL) does not seem to go into lock limit up or down as often as many ag futures do? Or better yet has anyone seen it happen at all?

[dalby]

among other reasons - because the limit is so large

it doesn't halt until a $10 per move.

with oil at 60, that's a 16% move.

so, it's a much larger move to get a halt, then the amount necessary for ags to lock limit

notice also that crude does not lock limit (as in shut down for the day) when this amount of movement occurs. it is a 5 minute halt only

there is no maximum move. theoretically oil could trade right to zero without a close

i'd be a buyer at that level


quoted from the NYMEX site:
Maximum Daily Price Fluctuation

$10.00 per barrel ($10,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $10.00 per barrel in either direction. If another halt were triggered, the market would continue to be expanded by $10.00 per barrel in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.

[cooter]

Excellent. Real info with a source given. Thanks for clarifying this for us.

[The Bear]

WOW $10.00 is a huge move in 1 day. I remember reading that about the 5 minute rule...and it did give me some confidence in the market...at least being able to liquidate eventually. I hear about these ag futures locking for DAYS, and that just freaks me out. How can people sleep at night if it kept moving against you, then what, the god forbidden margin call from the broker?

[torero]

Does anyone know the reason why limit-down is used in Ag futures then? I know that it's meant to decrease volatility for hedgers such as farmers, but doesn't make sense when the next days, it drops again.

[The Bear]

If it's locked limit down in ags, therefore selling is halted right?

Then how do futures prices move lower the next subsequent days that it's halted, if no selling is allowed?

[cooter]

Lock limit down (or up, as the case maybe) is for the day in the ags. Next day it's free to move the limit amount up or down again.

[dalby]

bear, the standing orders are matched on open. that's how it can lock limit for days in row.

[The Bear]

So dalby do you think if one were trading on ICE electronically, if a GTC stop order were in the system, would it likely get executed on DAY 2 of the halt since for that 5 minutes at the open, it's in the system?

Is the being stuck scenario only typical for pit traded contracts?