Limited Risk protection is also available on all our Oils and Metals markets.
This can be especially useful as the underlying markets often operate a system of price limits. Limited Risk protects you against the possibility of being locked into mounting losses should the market go 'limit down' or 'limit up'.
Opening the position
You think that the price of Crude Oil is set to fall but you want to limit your potential downside. So you decide to sell two contracts of the May Light Crude Oil with Limited Risk protection (one contract is the equivalent of US$10 per point).
It is March and our quote for May Light Crude Oil is 7984/7990. With Limited Risk transactions, you pay a premium on your opening price. So your position is opened at 7984 (bid price) minus 4 (the Limited Risk premium) = 7980.
Placing the Guaranteed Stop
Your position is opened at 7980. You decide to put your Guaranteed Stop at 8020. So the most you can lose on your position is:
Maximum possible loss
| Stop level | 8020 |
| Opening level | 7980 |
| Difference | 40 |
Maximum possible: 40 points x 2 contracts x US$10 per point = US$800
Triggering the Guaranteed Stop
Your predictions initially prove correct and the next day Light Crude begins to fall, but following this, Light Crude rallies and our quote rises to 8065/8071. Your position is automatically closed out at 8020. You have lost US$800, but the Limited Risk protection has saved you from a bigger loss, potentially more than $1800.