What is Stop Loss?
Stop Loss allows you to determine when to limit your loss from a trade.
When you have set up Stop Loss, it will create a Stop Market Order for your position. This specifies the exact time when your position will automatically close at the Stop Price.
What is a Stop Market Order?
The orders you submit for Stop Loss are Stop Market Orders (‘SMO’) with protection. These buy or sell contracts at a specified price, or better. A Stop Loss Market order means that it will send a Market Order with protection to attempt closing the position automatically when the contract price reaches the Stop Loss price. The Stop Loss order will be acceptable to fill within the set slippage tolerance based on the Stop Loss price.
All Stop Loss orders are made on a an Immediate-or-Cancel (‘IOC’) basis. This means that the order demands immediate execution or cancellation. It can be filled in whole or in part, with any remaining quantity automatically canceled. This is also known as a ‘partial fill’.
Why is Stop Loss important?
By setting up Stop Loss, you can better manage the profit and loss for your position(s) when placing an order without worrying about full loss. You can also freely adjust the Stop Loss level for your trade position(s) anytime. Therefore, you don’t have to constantly monitor and close your position(s) manually in order to limit your loss.
Are there any limitations on setting up Stop Loss?
You can set up Stop Loss for both Strike Options and UpDown Options that are offered by Crypto.com | Derivatives North America.
The same Stop Loss order will apply to all contracts in a position. For example, if you have an open BTC Strike Options long position at a Strike Price of US$70,000 and a size of 10 contracts, the Stop Loss order will apply for all 10 contracts at the same Stop Loss price.
However, you can set up different Stop Loss orders for other positions. Assuming you have another open BTC Strike Options long position at a Strike Price of US$71,000 with a size of 5 contracts, you may set up a Stop Loss order at a different Stop Loss price with different slippage tolerance for this position.
If you are setting up Stop Loss for your Rolling Strike Options position, please be reminded that the Stop Loss level will apply to the existing position only, and will not carry over to the next position initiated by auto-rolling.
For the same position, you can either set up Take Profit or Stop Loss for the same position, but you can freely change your settings even after the position has opened. For example, you can cancel your original Take Profit order and create a new Stop Loss order before your position is closed or expired.
How many types of Stop Loss settings are available?
You can set up your Stop Loss order by defining how you would like the Stop Loss (Market) order be executed based on one of the following:
Contract Price
Profit in dollar amount
Profit in percentage
Contract price
The contract price you set will be used to create the Stop Loss order as Stop Loss Price. The order will be filled within the set slippage tolerance based on the Stop Loss price if there is sufficient liquidity.
Loss in dollar amount
The loss amount you set (in $) refers to the total loss that you may lose from the entire position after deducting fees. It will have to be in negative number.
A contract price that most closely matches the loss amount you set will be calculated and used to submit your Stop Loss order.
If you have a Long position, the formula below will be used to calculate your Stop Loss order price, rounded up to the contract’s tick size.
Stop Loss Contract Price = Average Entry Price + (Loss Amount / No. of Contracts + (Exchange Fee + Technology Fee) * 2) * Tick Size / Tick Value
If you have a Short position, the formula below will be used to calculate your Stop Loss order price, rounded down to the contract’s tick size.
Stop Loss Contract Price = Average Entry Price - (Loss Amount / No. of Contracts + (Exchange Fee + Technology Fee) * 2) * Tick Size / Tick Value
Assuming you have defined the Loss Amount to be $100
Example 1 - You have a long BTC Strike Options position:
Number of Contracts = 50
Exchange Fee per contract = $0.15
Technology Fee per contract = $0.14
Tick Size = 0.10
Tick Value = $0.10
Average Entry Price = $5.00
The Stop Loss (market) order price will be:
= $5+(-$100/50+($0.15+$0.14)*2)*0.1/$0.1
= $3.60 (round up from $3.58 to the contract’s tick size)
Example 2 - You have a short BTC Strike Options position:
Number of Contracts = 50
Exchange Fee per contract = $0.15
Technology Fee per contract = $0.14
Tick Size = 0.10
Tick Value = $0.10
Average Entry Price = $5.00
The Stop Loss (market) order price will be:
= $5-(-$100/50+($0.15+$0.14)*2)*0.1/$0.1
= $6.40 (round down from $6.42 to the contract’s tick size)
Example 3 - You have a long ETH UpDown Options position:
Number of Contracts = 1
Exchange Fee per contract = $1.00
Technology Fee per contract = $0.99
Tick Size = 1
Tick Value = $2.50
Average Entry Price = $3,550
The Stop Loss (market) order price will be:
= $3,550+(-$100/1+($1.00+$0.99)*2)*1/$2.5
= $3,512 (round up from $3,511.59 to the contract’s tick size)
Example 4 - You have a short ETH UpDown Options position:
Number of Contracts = 1
Exchange Fee = $1.00
Technology Fee =$0.99
Tick Size = 1
Tick Value = $2.50
Average Entry Price = $3,550
The Stop Loss (market) order price will be:
= $3,550-(-$100/1+($1.00+$0.99)*2)*1/$2.5
= $3,588 (round down from $3,588.41 to the contract’s tick size)
Loss in percentage
The loss you set in percentage terms refers to the total loss % from the entire position after deducting fees.
A contract price that most closely matches the loss % you set will be calculated and used to submit your Stop Loss order.
If you have a long position, the formula below will be used to calculate your Stop Loss order price, rounded up to the contract’s tick size.
Stop Loss Contract Price = (1 + Loss %) * (Average Entry Price + (Exchange Fee + Technology Fee) * Tick Size / Tick Value) - Loss % * Floor Price + (Exchange Fee + Technology Fee) * Tick Size / Tick Value
If you have a short position, the formula below will be used to calculate your Take Profit order price, rounded up to the contract’s tick size.
Stop Loss Contract Price = (1 + Loss %) * (Average Entry Price - (Exchange Fee + Technology Fee) * Tick Size / Tick Value) - Loss % * Ceiling Price - (Exchange Fee + Technology Fee) * Tick Size / Tick Value
Assuming you have defined the profit in percentage = 50%
Example 1 - You have a long BTC Strike Options position:
Number of Contracts = 50
Exchange Fee per contract =$0.15
Technology Fee per contract = $0.14
Tick Size = 0.10
Tick Value = $0.10
Average Entry Price = $5.00
Floor Price = $0.00
The Stop Loss (market) order price will be:
= (1+(-50%))*($5+($0.15+$0.14)*0.1/$0.1)-(-50%)*($0)+($0.15+$0.14)*0.1/$0.1
= $3.0 (round up from $2.935 to the contract’s tick size)
Example 2 - You have a short BTC Strike Options position:
Number of Contracts = 50
Exchange Fee per contract = $0.15
Technology Fee per contract = $0.14
Tick Size = 0.10
Tick Value = $0.10
Average Entry Price = $5.00
Ceiling Price = $10.00
The Stop Loss (market) order price will be:
= (1+(-50%))*($5-($0.15+$0.14)*0.1/$0.1)-(-50%)*($10)-($0.15+$0.14)*0.1/$0.1
= $7.0 (round down from $7.065 to the contract’s tick size)
Example 3 - You have a long ETH UpDown Options position:
Number of Contracts = 1
Exchange Fee per contract = $1.00
Technology Fee per contract = $0.99
Tick Size = 1
Tick Value = $2.5
Average Entry Price = $3,550
Floor Price = $3,500
The Stop Loss (market) order price will be:
= (1+(-50%))*($3,550+($1+$0.99)*1/$2.5)-(-50%)*($3,500)+($1+$0.99)*1/$2.5
= $3,527 (round up from $3,526.19 to the contract’s tick size)
Example 4 - You have a short ETH UpDown Options position:
Number of Contracts = 1
Exchange Fee per contract = $1.00
Technology Fee per contract = $0.99
Tick Size = 1
Tick Value = $2.5
Average Entry Price = $3,550
Ceiling Price = $3,600
The Stop Loss (market) order price will be:
= (1+(-50%))*($3,550-($1+$0.99)*1/$2.5)-(-50%)*($3,600)-($1+$0.99)*1/$2.5
= $3,573 (round down from $3,573.806 to the contract’s tick size)
How to set up Stop Loss?
There are two ways to set up Stop Loss - when you are placing a trade or when you are managing an open position.
Method 1 - When placing a trade
Select a contract (Strike or UpDown Options) to trade
Tap Advanced Trading Options on the trading screen
Toggle on Stop Loss in the Advanced Trading Options menu
Select a Stop Loss type from the dropdown menu
Input a valid amount/value based on the selected Stop Loss type
Tap Confirm to save your Stop Loss setting.
The Stop Loss order will only be created after your trade has been successfully executed. If the trade fails to execute, the Stop Loss order will not be created and you will receive a push notification.
Method 2 - When managing an open position
Review the details of your open position
Tap Position Details at the bottom of the screen
Tap Stop Loss to set it up or amend an existing setup
Toggle on Stop Loss in the Advanced Trading Options menu
Select a Stop Loss type from the dropdown menu
Input a valid amount/value based on the selected Stop Loss type
Tap Confirm to submit the Stop Loss order
The Stop Loss order will be created after you click the ‘Confirm’ button. If the Stop Loss order fails to create, you will be notified by a push notification.
Can I change my Stop Loss setting after confirming it?
You may change your existing Stop Loss setting anytime before the position is closed or expired by using one of the methods above (detailed in How to set up Stop Loss).
You may also remove a Take Profit setting anytime before the position is closed or expired by using one of the methods above (detailed in How to set up Stop Loss) to toggle off Stop Loss and tap “Confirm”.
If you are changing your Stop Loss order when placing a trade for the same instrument, the Stop Loss order will only be updated after your trade has been successfully executed. If the trade fails to execute, the Stop Loss order will not be amended.
Can Stop Loss setting guarantee the defined loss?
No, it cannot guarantee the loss by setting up Stop Loss for your position because of the following reasons.
1. Filled within slippage tolerance
The Stop Loss order can be filled at any price within the slippage tolerance based on the Stop Loss price. Depending on the market conditions, the realised loss amount can be different from the indicated loss amount when you were setting up Stop Loss. You can find the average filled price in order details page.
2. Partial Fill
Given the contract price has hit your Stop Loss Price but there is insufficient liquidity to fill your Stop Loss order for all contracts (partial fill) within your slippage setting, your Stop Loss order for the remaining contracts will get rejected. When this happens, you will receive a reminder notification to reset Stop Loss for your remaining contracts.
3. No Liquidity
Given the contract price has hit your Stop Loss Price but there is no liquidity to fill your Stop Loss order for any contract within your slippage setting, your Stop Loss order will get cancelled. When this happens, you will receive a reminder notification to reset Stop Loss for your position.