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socrateaser
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 37952
Experience:  Retired (mostly)
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Hello. I had an account with $30K in cash in it and got into

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Hello. I had an account with $30K in cash in it and got into 100 puts for $1K. In the last seconds of the day it plummeted came into the money by $1.20, but quickly moved to the strike price after hours. Because of this, my broker exercised all of the puts to put me in a short position of $2.3 Million on Saturday. On Monday the market gapped up and I was wiped out and then some. My question is can they even give me so much leverage? Though self directed, I was incorrectly advised when calling the broker that exercise wasn't necessary and I would receive a cash settlement, and again told to I had insufficient assets to exercise and the puts would be worthless. The broker says it doesn't matter as there was nothing to be done, but I could have tried to get a loan to either fund the account or buy calls and wait for a better time. The position would have been profitable just a week later.

If you agreed to the short position, then you gambled and lost. If your broker made the second trade without your permission, then that's a theft/conversion and you can contact a private lawyer and sue or go to arbitration.

 

I don't know how long you've been trading, but the sort of thing you're describing is extremely typical in the commodity and forex markets. Traders prey on "investors" who don't have sufficient resources to stay in a position if it goes against them. They literally wait for the trades to come through and then they push the bid and ask until the investor is wiped out and has to liquidate.

 

All perfectly legal, and a total scam, simultaneously. Been going on for at least the last 50 years.

 

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