WTF Imagine this happened to you

As oil crashed, A 30-year-old Day Trader named, Shah bought 212 futures contracts for what he thought was $0.01 per barrel, not realizing that oil was actually trading at negative $3.70 per barrel.

Shah couldn't see the price in real time, as Interactive Brokers' system was unable to display a price below zero.

What he did not know is that oil’s first plunge into negative pricing had broken the Interactive Brokers platform, because its software "couldn’t cope with that pesky minus sign, even though it was always technically possible for the crude market to go upside down."

As a result, crude was actually trading at a negative $3.70 a barrel when Shah’s screen had it at 1 cent; the reason: Interactive Brokers never displayed a subzero price to him as oil kept diving to end the day at minus $37.63 a barrel.

At midnight, Shah some very bad news: he owed Interactive Brokers $9 million. He’d started the day with $77,000 in his account, expecting that his biggest possible loss was 100%, or $77,000.

It turned out to be 116 times that number.

"I was in shock," the 30-year-old told Bloomberg in a phone interview. "I felt like everything was going to be taken from me, all my assets." Not that Shah had anywhere remotely close to $9 million in assets.

Shah was not alone. Countless investors, especially retail daytraders on RobinHood who had followed every tick lower in the USO by buying more of the ETF in hopes of a rebound, had a brutal day on April 20 regardless of what brokerage they had their account in.

What set Interactive Brokers apart is that its customers were flying blind, unable to see that prices had turned negative, or in other cases locked into their investments and blocked from trading. Adding insult to injury, Bloomberg reports that a big reason why Shah lost an unbelievable amount in a few hours, is that the negative numbers also blew up the model Interactive Brokers used to calculate the amount of margin - aka collateral - that customers needed to secure their accounts.

Commenting to Bloomberg, Interactive Brokers chairman and founder Thomas Peterffy, said the journey into negative territory exposed bugs in the company’s software. “It’s a $113 million mistake on our part,” the 75-year-old billionaire said in an interview Wednesday. Since then, his firm revised that loss estimate down to $109.3 million. It’s been a moving target from the start; on April 21, Interactive Brokers figured it was down $88 million from the incident.

The good news for Shah and countless others like him is that customers would be made whole, Peterffy promised. "We will rebate from our own funds to our customers who were locked in with a long position during the time the price was negative any losses they suffered below zero."

While IB struggles to resolve the loose ends from the historic plunge, this is how Shah ended up owing millions.

The day trader in Mississauga, Canada, bought his first five contracts for $3.30 each at 1:19 p.m. on that eventful Monday. Over the next 40 minutes or so he bought 21 more, the last for 50 cents. He tried to put an order in for a negative price, but the Interactive Brokers system rejected it, so he became more convinced that it wasn’t possible for oil to go below zero. At 2:11 p.m., he placed that dream-turned-nightmare trade at a penny.


By: DonaldTrumpispresident (1417.80)

Tags: Stock market