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Will the Broker honour this?

  • #1
  • First Post: Edited Apr 26, 2008 8:13am Apr 25, 2008 11:23am | Edited Apr 26, 2008 8:13am
I was just wondering and im not sure if it has been discussed here before and what i am saying maybe simply stupendous. If it is i am ready to be corrected.

Before news you will usually get some brokers increase their spreads. So if i go long and short at the same instance to take advantage of the wide spreads and close the trade when the spread closed up, is it considered manipulation? will the broker honour my winnings?

I have not tried this before thus i would like to get the views of those who has experience in this

Edit: Thread closed. Lack of research before submitting this, i thoought too much abt betting on contract specs. The thread does not add anymore value. Apologies.
  • #2
  • Apr 25, 2008 11:37am Apr 25, 2008 11:37am
It all depends on the broker... some brokers have limitations regarding hedging, others do not. You might find that in fast market conditions, particularly if you're trading with against a dealing desk/bucket shop, that it will be nearly impossible for your trade to get executed. Again, it all depends on the broker... Which one are you using?
  • #3
  • Apr 25, 2008 11:43am Apr 25, 2008 11:43am
Quoting jest1081
I was just wondering and im not sure if it has been discussed here before and what i am saying maybe simply stupendous. If it is i am ready to be corrected.

Before news you will usually get some brokers increase their spreads. So if i go long and short at the same instance to take advantage of the wide spreads and close the trade when the spread closed up, is it considered manipulation? will the broker honour my winnings?

I have not tried this before thus i would like to get the views of those who has experience in this
The spread usually widens at the news time or slightly before that. Most brokers do not accept your trade request immediately in such times. The odds that you'd be able to place a short and a long trade is really slim. I don't think what you suggest is practical.

I suggest that you try it on a demo account though. See if it theoretically can make money.
  • #4
  • Edited 12:00pm Apr 25, 2008 11:55am | Edited 12:00pm
I don't see how you can make money on this. Since one trade is going to be a winner and one a loser, let's look at a scenario where price doesn't move at all:

Spread = 1 pip before widening
1.0000/1.0001

Spread = 10 pips after widening
0.9995/1.0005

You take a long at 1.0005 which immediately becomes -10 pips @ 0.9995
You take a short at 0.9995 which immediately becomes -10 pips @1.0005

So you are initially down 10 pips on each trade

The spread goes back to 1 pip @ 1.0000/1.0001

Now your long is -5 @ 1.0000 and your short is -6 @ 1.0001

That's a net of -11 which is better than the -20 that you had when you took both trades, but it's still a loss.
  • #5
  • Apr 25, 2008 12:19pm Apr 25, 2008 12:19pm
Quoting jest1081
I was just wondering and im not sure if it has been discussed here before and what i am saying maybe simply stupendous. If it is i am ready to be corrected.

Before news you will usually get some brokers increase their spreads. So if i go long and short at the same instance to take advantage of the wide spreads and close the trade when the spread closed up, is it considered manipulation? will the broker honour my winnings?

I have not tried this before thus i would like to get the views of those who has experience in this
every broker will honour that, because in your case they always win.
  • #6
  • Apr 25, 2008 12:41pm Apr 25, 2008 12:41pm
Quoting metcalfe
every broker will honour that, because in your case they always win.
Agreed, news time is when the brokers make a killing.
  • #7
  • Edited 8:20pm Apr 25, 2008 7:11pm | Edited 8:20pm
Quoting byorkFX
I don't see how you can make money on this. Since one trade is going to be a winner and one a loser, let's look at a scenario where price doesn't move at all:

Spread = 1 pip before widening
1.0000/1.0001

Spread = 10 pips after widening
0.9995/1.0005

You take a long at 1.0005 which immediately becomes -10 pips @ 0.9995
You take a short at 0.9995 which immediately becomes -10 pips @1.0005

So you are initially down 10 pips on each trade

The spread goes back to 1 pip @ 1.0000/1.0001

Now your long is -5 @ 1.0000 and your short is -6 @ 1.0001

That's a net of -11 which is better than the -20 that you had when you took both trades, but it's still a loss.
oh yes. my bad. I keep thinking abt multiple futures contract spread differences. yes ur right. That was really stupid of me. lol

i think the only way to arb is to run multibroker quotes and short the one offering bigger and long the one offering smaller and wait until their prices converge. I've seen this happen a few times with my brokers.

more often than not, their qoutes will come together after a few mins/hours.

I think one would wanna research this esp the relationship between an ecn and a bucketshop broker. My IB(demo) quotes can be 10pips away from efx(live) sometime....and after sometime the closes up. But with CMC (live) its almost impossible to find the anomaly, it seems that their qoutes are always consistent. Well sometime not but the diff is too small to make any good out of it.

thanks.
  • #8
  • Apr 25, 2008 7:40pm Apr 25, 2008 7:40pm
Quoting metcalfe
every broker will honour that, because in your case they always win.
If I Go Broke Trying Then I Will die happy.
  • #9
  • Last Post: Apr 26, 2008 2:05am Apr 26, 2008 2:05am
Quoting Moe
http://digilander.libero.it/le.facci...o/00035003.gif
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