This is a complicated issue as it’s not just the act of creating a contract.
Let’s say there are 100,000 barrels of oil in the world and 10 are sold each day and they are shipped from various places in various amounts but generally there are, at any given time, 30 days of oil at sea (300 barrels). If I am taking straight delivery, I would contract with the producers to deliver me 1 barrel of oil per day for a year or 5 years or whatever for $50 a barrel. My interest is to have a steady supply and the producers interest is to have a steady demand. He wants to charge as much as possible, I want to pay as little as possible.
Enter the speculators. Rather than me (the actual user) haggling with the producer directly (as is done in most business transactions), the speculator steps in and offers to buy as much oil as the guy can produce for $40. I can’t do that because I only need one barrel a day but if the guy can make 1.3 or 1.6 barrels a day or he can add a new pump and make 2 barrels a day, knowing he has a buyer at $40, he will be thrilled (assuming the profits work selling 2Bpd at $80 vs 1Bpd at $50).
In a perfect world, the speculator is simply taking on some risk and will make the difference between the $40 they are paying and the $50 I am willing to pay and they will sell the excess for $40-50 and make a nice overall profit.
But then the speculators get greedy. They know I NEED 1 barrel per day and perhaps there was some seasonality to pricing or natural fluctuation but all the speculator has to do is wait for the price to rise and then hold it there. If supply is uneven, they can divert some to storage. They are still buying it, creating demand but they are not delivering it so there is suddenly a “shortage” where none existed before. As they accumulate more barrels in storage (say 100) they realize that getting the price up to $60 makes them not only $10 a day more per barrel they sell me,…
In the wake of the Panama Papers being released, the U.S.Treasury announced that it will use existing powers in order to make two rule changes that are intended to stop tax evasion.
First, in a rule which amends the US Bank Secrecy Act, the Treasury said it will require financial institutions to verify the identity of the real people, or "beneficial owners", who control companies opening account...
All eyes were on this morning's employment report for April, which largely disappointed expectations. The equity market was little fazed by the light growth in nonfarm new jobs. The S&P 500 bounced off its rather unremarkable -0.55% intraday low about 90 minutes into the session. It slowly rallied to its 0.35% intraday high as the final hour approached and ended the session just a tad lower with a 0.32% closing gain.
About that jobs report ... is "mediocre" an apt description? Consider: The number of new jobs came in at 160K, well below the mainstream expectation of about 200K. On the other hand, since January 2011, nonfarm payrolls have increased by an average of 0.15% monthly with a high-low range of 0.26% to 0.03%. The April increase was 0....
It has been interesting as of late reading the numerous views espousing the value of “indexing” and lamenting the short-term underperformance of some fund manager. What is more interesting is a large majority of these individuals have only been involved in the markets post-financial crisis. In other words, many of these individuals have never lived through a 2000 or 2008 type financial market event.
It is only during these periods where true investment “metal” is tested as the battlefield becomes a vast wasteland of bodies and failed ideas. Despite strategies that promote the value of long-term investing and the benefits of indexing, it is the realization of “loss” that derails even the most well-intentioned of individuals.
Two years after Newsweek wrote an inaugural article upon returning to print in which it "unmasked" bitcoin creator Satoshi Nakamoto and which turned out be a hoax (the author "found" Nakamoto using a white pages search), earlier this week the world was fixated on the story of another self-professed bitcoin "creator", this time Australian entrepreneuer Craig Wright, who &quo...
Relypsa Inc (NASDAQ: RLYP) shares have plummeted 51 percent year-to-date, under pressure from debt-financing related concerns. Cantor Fitzgerald’s Mara Goldstein reiterated a Buy rating for the company, while reducing the price target from $42 to $41. The analyst believes the 1Q16 results would be “a stabilizing force for the shares.”
Positive Data Points For Veltassa Launch
Veltassa metrics look favorable so far, including a low payer rejecti...
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Although we try to stay focused on finding and managing promising trade ideas, the comments in the comment section sometimes take a political turn (for access, try PSW — click here!). So today, Jean Luc writes,
The GOP debate last night was just unreal – are these people running to be president of the US or to lead a college fraternity! Comparing tool size? The only guy that looks semi-sane is Kasich. The other guys are just like 3 jackals right now.
And something else – if Trump is the candidate, that little Romney speech yesterday is probably already being made into a commercial. And all these little snippets from the debate will also make some nice ads! If you are a conservative, you have to be scared now.
Phil writes back,
I was expecting them to start throwing poop at each other &n...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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