Reciprocal limited risk contracts and system for exchanging same

摘要

A bracket trade is provided wherein a bracket trade is a reciprocal risk limitation futures contract with two stops placed at determined levels on either side of a present value of an underlying market, so a possible range in which the exchange's quotation can move once the trade has been opened is ‘bracketed’ by these two levels. The brackets function as trigger stops. If the stop or limit is triggered, the position is closed at exactly that level without slippage. As a result, in respect of an underlying market that is traded 24 hours a day the bracket trade has a delta of 1 regardless of the fluctuations of the underlying market or proximity of the exchange's quotation to the brackets; and where the underlying is not traded 24 hours a day the bracket trade will have a delta of 1 on the expiry day of the contract. Bracket trades provide a means by which exchange members can trade at a transparent market price but with the safety of a limited risk stop.