Your Market Is Closed But Others Are Open

A lot of people will be in the middle of enjoying a four-day weekend—trying to forget about work for a few days and eating far too many chocolate eggs. They’ve left some stops in place for their open positions and are confident their max losses are within risk limits, right?

But what happens if you’ve got a position in LME copper, and CME copper is still trading during an LME holiday?

Unfortunately, with the speed at which these markets move—and how fast news hits the wire—four days is an eternity.

Normally, stop-losses are an excellent way to manage downside risk. However, if CME copper moves significantly up or down while LME is closed, it’s likely that LME will gap on the reopen to catch up. And if the market gaps past your stop, it will still be triggered—but at the next available price. That could be hundreds of dollars per ton lower (if you’re long and your stop is a sell) or higher (if you’re short and your stop is a buy) than your intended level. Your carefully set risk limits could easily be breached.

Unless—of course—you’ve asked your broker to work your stop based on the market that remains open. This is a common request, where brokers will work an LME stop order off the live CME price, factoring in any arb. When you do this, you’re no longer at the mercy of wherever LME happens to reopen. While you may face some slippage if your stop is triggered, it will likely be filled close to the level you placed it.

Now, there is a potential downside to this approach. Let’s say you were long LME copper at $9,000/mt, with a sell-stop at $8,700/mt. While LME is closed, CME trades down to an LME equivalent of $8,650. Your $8,700 stop gets triggered, as requested, on a CME basis. But before LME reopens, new information causes CME to rebound—back to the equivalent of $9,000. When LME resumes trading, the rally continues. But you’ve already been stopped out.

There’s no perfect way to manage these situations—it often comes down to the individual trader’s approach. But it’s important to know this option exists, especially if you’d prefer to err on the side of caution, given the current volatility.

At Perfectly Hedged, we help trading teams navigate exactly these kinds of real-world risks—through smarter strategies, better tools, and training that sticks.