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What is the difference is between Stop Price Value and Protection Point?


#1

Hi all, Ive*come across something whilst doing research and hoping you can clarify what the difference is between the Stop Price Value (SPV) and the Protection Point (PP)?
Ive read through the associated online spread sheet which was online at *http://www.cmegroup.com/confluence/display/EPICSANDBOX/GCC+Product+Reference+Sheet
I thought the PP is the max amount of slippage allowed as set by the exchange before it tosses your order out the door… but uncertain now after seeing the SPV sitting there - any comments??
Appreciated


#2

This is a really good question!

We can explain the Stop Price Value (SPV) and the Protection Point (PP) to the best of our understanding. Market Protected and Stop Protected orders are automatically assigned a limit price from a pre-defined value without the user having to manually define the limit price. These is not “slippage” per se rather a limit price that is assigned to each futures instrument when a Stop and Market orders are applied.

There was a time when a stop has become a market price, but huge sudden moves like flash crashes cause huge slippage for traders. So the exchanges have applied a Protection Point (PRT) which is a limit price assigned automatically to your stops.
This is subject to change and subject to the logic of the CME’s Matching Engine.
The Positive: You have a chance to potentially get out at the limit price if the price drops way below the Protection Point.
If the market is volatile enough, the price could possibly come back and give you a chance to exit at a reasonable price.
**The Negative:**If the price drops way below the Protection Point, and you are not executed then you are not protected.
Your stop is not triggered, and you continue to suffer losses beyond your initial intention.
This means you NEVER walk away from your computer during trading hours.

I hope this was of help.

Matt