Commsec conditional orders - range between trigger and limit price too small?

[Sasqua]

First post- here goes....

I want to protect a portfolio with around 20 stocks from a large fall. I'm not a regular trader, holding most stocks for around twelve months. I trade through Commsec and thought I would set conditional orders on each stock to achieve this. Yesterday I had a go at it but was a bit perplexed by the allowable difference between the trigger and limit price. For eg, on ANZ, I set a limit of 28.73, but the highest trigger allowable was 28.95. When I entered something higher, I got an error message telling me the difference between the two was too great. In a rapidly falling market ( the type I'm trying to protect against), I would have thought by the time the trigger has fired and the order placed in the market, the limit may already have been passed, leaving me holding the stock. I also wonder about the price opening lower than the limit in a worldwide fall.

I rang Commsec and the guy I spoke to agreed that it didn't seem right and would pass it on as feedback. We found the clause in the terms and conditions , which just says that the difference between the two prices has to be acceptable to Commsec!!! No clue even as to a percentage etc. He suggested another way around it would be to buy put options but I think this would be expensive. I really just want to have a set and forget type arrangement in place, that won't cost unless it happens.

Am I fussing about nothing - perhaps the order in all likelihood would be fulfilled (but the Commsec guy thought my point was valid.) I'd really appreciate your thoughts on this and whether I should consider some other way of protecting against a severe downward movement?

Thanks.

 

[Value Collector]

Re: Comsec conditional orders- range between trigger and limit price too small?

I don't use anything like this in my portfolio. But I was thinking in your case is it possible to have no limit price, eg your shares are just sold into the market at any price if your trigger price is hit.

I know there are downsides to that, But I think it is going to be hard to get a guaranteed stop loss price without paying someone for it eg. buying a put option.

Buying a put option would be the best way to put a guaranteed floor under your position, however your paying the market to take some risk off your balance sheet, so like most insurance it comes at a price.

 

[onthesword]

Re: Comsec conditional orders- range between trigger and limit price too small?

You can use a trailing percentage stop, must be less than 15%, might be more appropriate.

 

[Craton]

Re: Comsec conditional orders - range between trigger and limit price too small?

First post- here goes....

<snip />

Am I fussing about nothing - perhaps the order in all likelihood would be fulfilled (but the Commsec guy thought my point was valid.) I'd really appreciate your thoughts on this and whether I should consider some other way of protecting against a severe downward movement?

Thanks.

G'day Sasqua and welcome to ASF.

Nope, you're not fussing about nothing. It costs to place a conditional order plus the actual brokerage fee once fired.

From here: https://www2.commsec.com.au/media/57962/secureyourposition.pdf

Damn PDF, can't copy and paste anyhow, page 10 Placing a Conditional Order Instruction points 4 thru 11 seem to be quite clear. I'd say your trigger price and limit price were outside Commsec's acceptable limits. I'm guessing your placing your limit to low that and/or your placing the trigger to high above the limit.

ANZ last SP today of $33.52 so at $28.73 that's a lot to give up isn't it?

 

[barney]

Re: Comsec conditional orders - range between trigger and limit price too small?

First post- here goes....

I want to protect a portfolio with around 20 stocks from a large fall. I'm not a regular trader, holding most stocks for around twelve months. I trade through Commsec and thought I would set conditional orders on each stock to achieve this. Yesterday I had a go at it but was a bit perplexed by the allowable difference between the trigger and limit price. For eg, on ANZ, I set a limit of 28.73, but the highest trigger allowable was 28.95. When I entered something higher, I got an error message telling me the difference between the two was too great. In a rapidly falling market ( the type I'm trying to protect against), I would have thought by the time the trigger has fired and the order placed in the market, the limit may already have been passed, leaving me holding the stock. I also wonder about the price opening lower than the limit in a worldwide fall.

I rang Commsec and the guy I spoke to agreed that it didn't seem right and would pass it on as feedback. We found the clause in the terms and conditions , which just says that the difference between the two prices has to be acceptable to Commsec!!! No clue even as to a percentage etc. He suggested another way around it would be to buy put options but I think this would be expensive. I really just want to have a set and forget type arrangement in place, that won't cost unless it happens.

Am I fussing about nothing - perhaps the order in all likelihood would be fulfilled (but the Commsec guy thought my point was valid.) I'd really appreciate your thoughts on this and whether I should consider some other way of protecting against a severe downward movement?

Thanks.

A couple of alternatives ................

1) You could gradually cover your Stock position with a synthetic futures position via a CFD provider.

2) You could cover your Stock position at your preferred level by taking on the equivalent Short positions via a CFD provider

For example 1) You could scale into a hedging position by ...... If the market rises X% (you determine the percentage that suits your objective), sell Y mini positions of the SPI200 or equivalent (you determine how quickly you want to completely hedge the position by how many "Y"s you sell)

or for 2) Choose your levels, and place pending orders for the Short positions with your CFD provider, or simply Sell Short at anytime you think the market is extended and you are happy to neutralise your position.

Doing either of the above of course caps the downside if the market drops heavily, but it also caps any upside if it rises.

Pros and Cons for all the above, and there will be transaction costs to sell short and hold those short positions. Personally I'd do 1) if I had to make a choice, but then again, if you think the market is a bit wobbly, you could simply sell your current Stock positions and sleep at night

Cheers.

 

[Sasqua]

Thanks for the advice. I'm off now to investigate your suggestions. What a resource you guys are - thanks again.