Risk Limits

Maximum position limits examples

The following examples show how position limits are set using the Max Position (net), Max Position per Contract and Max Long/Short settings on the Accounts | Limits tab.

If you want to limit a parent account and its child sub-accounts to 30 GE Calendar spreads, you can set the GE Maximum Long/Short (gross) field to 30. Within the Maximum Long/Short of 30, if you want to allow an outright or unhedged position of 5, you can set the GE Maximum Position (net) to 5. In addition, if you want to limit the position on any individual contract to 15, you can set the GE Maximum Position per contract to 15 as shown in the following table.

Product Type Max Order Quantity (Outrights) Max Order Quantity (Spread/Strategy) Maximum Position (Net) Maximum Position per Contract Max Long/Short
GEFutureUnlimitedUnlimited51530

If an account or its child accounts have been used to buy 15 Mar19-Jun19 spreads and sell 15 Sep19-Dec19 spreads, it has reached its Maximum Long/Short (gross) position limit of 30. This is because the account is long 30 (15 Mar19 + 15 Dec19) for the GE and also short 30 (15 Jun + 15 Sep). Traders cannot place any more GE trades using this account until the account’s position has been reduced in one or more of the four contract months (i.e., a trader needs to sell Mar or Dec, and buy Jun or Sep, or a combination using this account).

Spreads and Strategies (ZB) calendar spreads: Example 1

Thew following examples show risk settings for ZB calendar spreads. For these examples, the following risk parameters are set:

Product Type Max Order Quantity (Outrights) Max Order Quantity (Spread/Strategy) Maximum Position (Net) Maximum Position per Contract
ZBFuture5251050

The account has the following position:

 Account ZB Sep19 ZB Dec19 ZB Mar20 ZB Jun20 ZB Product level ABCDEF 0 0 0 0 0

Action: Trader attempts to Buy 50 Sep19-Dec19 spreads using this account.

Result: The order is rejected.

Explanation: Spread Order Quantity of 50 exceeds the Max Order Quantity for spreads of 25.

Spreads and Strategies (ZB) maximum net position for a calendar spread: Example 2

Action: Trader attempts to Buy 25 Sep19-Dec19 spreads using this account.

Result: The order is accepted.

Explanation: Spread Order Quantity of 25 does not exceed the Max Order Quantity for spreads of 25. The resulting Product-level position remains 0. The resulting contract-level position in all contracts is less than the Maximum Position (net) of 50.

 Action ZB Sep19 ZB Dec19 ZB Mar20 ZB Jun20 ZB Product level Current Position 0 0 0 0 0 New Order 25 -25 Resulting Position 25 -25 0 0 0 Accept/Reject A A A A A

Spreads and Strategies (ZB) open position: Example 3

Action: Assuming the resulting position from Example 2, the trader attempts to Buy ten (10) Dec14 contracts using this account.

Result: The order is rejected.

Explanation: The Order Quantity of 10 exceeds the Max Order Quantity for outrights of 5.

Spreads and Strategies (GE) intra-product spreads: Example 1

Thew following examples show risk settings for intra-product GE spreads. For these examples, the following risk parameters are set:

Product Type Max Order Quantity (Outrights) Max Order Quantity (Spread/Strategy) Maximum Position (Net) Maximum Position per Contract
GEFuture505001001000

The account has the following position:

 Account GE Sep19 GE Dec19 GE Mar20 GE Jun20 GE Product level ABCDEF 200 200 0 0 0

Result: The order is rejected.

Explanation: The order quantity of 500 is within the Max Order Quantity for spreads. Since the middle leg of the butterfly sells 2x the quantity of the other legs, the resulting position in Dec19 is beyond the Max Position limit per contract of 1000.

 Action GE Sep19 GE Dec19 GE Mar20 GE Jun20 GE Product level Current Position 200 -200 0 0 0 New Order 500 -1000 500 Resulting Position 700 -1200 500 0 0 Accept/Reject A R A A A

Spreads and Strategies (GE) intra-product spreads maximum order quantity: Example 2

Action: Trader attempts to Buy 50 Sep19-Dec19-Mar20-Jun20 Eurodollar packs.

Result: The order is rejected.

Explanation: The order quantity of 50 is within the Max Order Quantity for spreads. An order for a pack buys an equal number of contracts in four consecutive deliver months. It has the same effect at the product level as buying 4 outright contracts. The resulting product level position of long 200 exceeds the Maximum Position (net) limit of 100.

 Action GE Sep19 GE Dec19 GE Mar20 GE Jun20 GE Product level Current Position 200 -200 0 0 0 New Order 50 50 50 50 Resulting Position 250 -150 50 50 200 Accept/Reject A A A A R

Spreads and Strategies (GE) intra-product spread order: Example 3

Result: The order is accepted.

Explanation: The order passes all risk checks.

 Action GE Sep19 GE Dec19 GE Mar20 GE Jun20 GE Product level Current Position 200 -200 0 0 0 New Order 50 -100 50 0 Resulting Position 250 -300 50 0 0 Accept/Reject A A A A A

Interproduct Spreads maximum position limits: Example 1

Interproduct Spreads work differently than calendar Spreads. For example, assume an account that does not belong to an account group has the following risk parameters and position:

 Product Type Max Order Quantity Maximum Position (Net) Maximum Position per contract GLB Future N/A 6 12 GE Future N/A 10 20 GLBGE Spread 11 N/A N/A

Note: Limits marked "N/A" are ignored for interproduct spreads.

The account has the following position:

 Account GLB Jun19 GLB Jul19 GLB Aug19 GLB Sep19 GLB Product level ABCDEF 0 0 0 0 0
 Account GE Jun19 GE Jul19 GE Aug19 GE Sep19 GE Product level ABCDEF 0 0 0 0 0

Action: Trader enters an order to Buy five (5) GLB Jun 15 - GE Jun 15 Spreads.

Result: The order is accepted.

Explanation: The order passes the Maximum Order Quantity check versus the GLBGE Spread limit of 11 in this case. It also passes the Maximum Position checks versus the Future and Spread position limits for each leg.

Interproduct Spreads and no open position: Example 2

Given only the risk parameters below and no initial positions:

 Product Type Max Order Quantity Maximum Position GLBGE Spread 11 N/A

Action: Trader enters an order to Buy ten (10) GLB Jun 15 – GE Jun 15 Spreads.

Result: The order is accepted.

Explanation: The order passes the Maximum Order Quantity check for the GLBGE Spread. No Maximum Position checks are performed because no Future or Spread limits have been defined for the legs. The trader’s position in the GLBGE spread is unlimited.

Interproduct Spreads worst case position: Example 3

Given the following risk parameters:

 Product Type Max Order Quantity Maximum Position (Net) Maximum Position per contract GLB Future N/A 6 12 GE Future N/A 10 20 GLBGE Spread 11 N/A N/A

The account has the following position:

 Account GLB Jun19 GLB Jul19 GLB Aug19 GLB Sep19 GLB Product level ABCDEF 5 0 0 1 6
 Account GE Jun19 GE Jul19 GE Aug19 GE Sep19 GE Product level ABCDEF -5 0 0 -1 -6

Action: Trader enters an order to buy two (2) GLB Jun 19–GE Jun 19 Spreads.

Result: The order is rejected.

Explanation: The order quantity check succeeds since the current order quantity is 2 and the Maximum Order Quantity for the GLBGE Spread is 11.

For the GE leg, the contract-level (i.e., Spread) Maximum Position check passes since the contract-level Worst Case Position (WCP) is Short 7 and the GE Maximum position limit per contract is 20. The Maximum position (net) check passes because WCP for the product is Short 8 and the Maximum Position (net) limit is 10.

For the GLB leg, the Maximum Position per contract check passes since the contract-level WCP is Long 7 and the GLB Maximum Position per contract limit is 12. However, the WCP for the product is Long 8, which exceeds the GLB Maximum Position (net) limit of 6. Therefore, the order is rejected.

Calender Spread maximum position limits: Example 1

While calendar spreads and other spreads that have equal numbers of buys and sells are position-neutral, those that do not have equal numbers of buys and sells are treated as outrights to the extent that they have a net long or short impact at the Product-level.

• A Eurodollar Pack is a spread consisting of buys in four (4) different delivery months. Buying one (1) pack has the same impact at the Product-level as buying four (4) outrights.
• A 5 Year Eurodollar Bundle consists of buys in 20 different delivery months. Buying one (1) 5 Yr Bundle has the same impact at the Product-level as buying 20 outrights.

Given the risk parameters and position below:

Product Type Max Order Quantity (Outrights) Max Order Quantity (Spread/Strategy) Maximum Position (Net) Maximum Position per Contract Max Long/Short
ESFuture1020102030

The account has the following position:

 Account ES Mar19 ES Jun19 ES Sep19 ES Dec19 ES Product level ABCDEF 10 10 0 -10 -6

Action: Trader enters an order to buy 15 Sep 19-Dec 19 Spreads with the account.

Result: The order is rejected.

Explanation: The maximum Long Product Position would be 35 (10 Mar19 + 10 Jun19 + 15 Sep 9) and the Max Long/Short is 30.