The Standard Account

The "Standard Account" gives you the option to decide whether to place stop orders on individual trades (either standard stop orders or guaranteed stop orders) to protect your open positions. This is in contrast to the Limited Risk Account which automatically attaches a guaranteed stop order to each trade. The Standard Account therefore enables you to decide on a case by cases basis whether you wish to protect your open positions, depending on your assessment of the risk.

A guaranteed stop order limits the worst case scenario for an open trade and eliminates the risk of price gapping. Whether the price of the financial instrument moves up or down, the protection from this guaranteed stop order will hold. Note that if you use a guaranteed stop order, you are charged a premium to cover the added risk to Spread Co of having to guarantee the price of your stop order if it is triggered. The premium for the guaranteed stop order is adjusted into the trade price. If you open a long position (buy), the premium will be added to your trade price. If you open a short position (sell), the premium will be subtracted from your trade price.

The guaranteed stop order must be placed a minimum distance from the current market price. If your trade with an attached guaranteed stop order is rolled into the next day a further premium is charged on the rollover. For further details please see the Market Information Sheet.

Where you open trades in a Standard Account without placing guaranteed stop orders on the trades, these open trades will automatically be netted off against each other. For example, if you have a long trade open in Tesco shares (i.e. you have bought Tesco shares) and you subsequently sell the same quantity of Tesco shares, the "sell" will automatically close off the original open "buy". Therefore your profit/loss will be realised when the opposite trade to your opening trade is executed.

Where you open trades in a Standard Account and decide to place guaranteed stop orders on the trades, these open trades will not automatically be netted off against each other. To close a trade with an attached guaranteed stop order, you will have to actually close that trade.

The Limited Risk Account

The "Limited Risk Account" enables you to limit your exposure to losses, as an associated guaranteed stop order is created for every open trade that you hold. Hence, each trade is treated as an individual open position. At the time you place the trade, a guaranteed stop order will be created automatically at the equivalent distance to the amount margined on your position from your opening price. If you are going long a guaranteed sell stop would be created and if you’re going short and guaranteed buy stop would be created to protect your risk exposure.

Once the trade is executed, the guaranteed stop order will automatically become active. If the price of the financial instrument moves in your favour, you can close your position to realise your profit. The associated guaranteed stop order will then automatically be cancelled. If the market price moves against you, on the other hand, and down to the guaranteed stop order price, the guaranteed stop order will automatically be executed. Your position will thus be closed and you will realise a loss.

A guaranteed stop order limits the worst case scenario for an open trade and eliminates the risk of price gapping. Whether the price of the financial instrument moves up or down, the protection from this guaranteed stop order will hold. Note that if you use a guaranteed stop order, you are charged a premium to cover the added risk to Spread Co of having to guarantee the price of your stop order if it is triggered. The premium for the guaranteed stop order is adjusted into the trade price. If you open a long position (buy), the premium will be added to your trade price. If you open a short position (sell), the premium will be subtracted from your trade price.

The guaranteed stop order must be placed a minimum distance from the current market price. If your Limited Risk Account Trade is rolled into the next day a further premium is charged on the rollover. For further details please see the Market Information Sheet.

The margin and financing for Limited Risk Accounts are calculated on a gross basis.

Click here to see an example of how a guaranteed stop order works.