What exactly is a “Rio Trade”?

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A “Rio Trade” is a phrase you may hear banded around dealing rooms in the City when things aren’t going quite according to plan.

Time for a Rio trade mate!

I’ve used the term Rio Trade all my two-decade-long career in the stock market. But the other day, I used the phrase in conversation with a few stay-at-home traders and despite them nodding away, it turns out that a lot of investors don’t know what a Rio Trade is.

This is systematic in finance.  If you don’t understand – blag it and hope no one notices.

What is a Rio Trade?

A Rio trade is, a phrase used to describe a go-for-broke trade.  A last bastion of hope, an all-or-nothing trade that will dig a trader out of a black hole of losses.  Basically, betting the farm on one last punt.

How do Rio Trades Work?

In fullness, the stages of doing a Rio Trade would be:

  1. Leverage up to the max the last remaining funds in your account (or circumvent your firm’s risk controls).
  2. Pick an asset class at random or one that you have been losing all your money on.
  3. Hit buy or sell at random.
  4. Go to the airport.
  5. Buy a plane ticket to Rio.
  6. Whilst holding that ticket at the departure gate check the market on your trading app to see if your trade is showing a profit or loss.
  7. If it is profit, go back to the office and act like you knew what you were doing all along.
  8. If it is a loss, get on the plane to Rio and never look back.

How common are Rio Trades?

It happens more often than you think, but instead of traders going to Rio, they go to jail, or the compliance sin bin, or try to return to politics as though they haven’t bankrupted one of the oldest financial institutions and pretend nothing happened.

Or, for retail traders, who have the benefit of negative balance protection, they just lose all their money and have to start again from scratch.

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