$this->bbcode_second_pass_quote('Hughj', 'Y')et more double talk. The oil market is crooked, soon we will have proof.
Hugh
PeakOil is You
Oil Futures Traders Are The Problem
Re: Oil Futures Traders Are The Problem
by peripato » Fri 24 Jun 2011, 01:40:56
*Yawn* I get up to discover that n-troll, not content to discredit the laws of physics all on his own, is attempting the same with the futures market.
I'll try and keep this brief. Many times more paper barrels are traded every day, just on the NYMEX, than are actually physically sold, let alone produced. On any given day upwards of 500,000 contracts, notionally controlling around 500,000,000 barrels of oil (1 contract = 1000 barrels), will change hands, some days more than a million contracts will do so.
Those bozos were just trying to pilfer $50 million from their scheming, which is a mere trifle in comparison to this stupendous figure.Sorry to say but most contracts are held by hedgers who want to mitigate price risk, some out to 2019 or even further, not speculators who are after short-term gain. Where speculators take a long position, forcing upwards pressure on price, another speculator is taking the short-side, forcing downwards pressure on price. Also traders are not very good at making money at all, with more than 90% being net losers. So, tell me again how do speculators distort the market exactly?
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Re: Oil Futures Traders Are The Problem
by Pops » Fri 24 Jun 2011, 08:13:13
It's OK guys, the fact that these guys manipulated the spot and derivative market to a slight extent doesn't change anything fundamental.
Well - except your insistence that those markets absolutely can't be manipulated.
Well - except your insistence that those markets absolutely can't be manipulated.
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
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Re: Oil Futures Traders Are The Problem
by pedalling_faster » Fri 24 Jun 2011, 09:00:30
$this->bbcode_second_pass_quote('Pops', 'T')he only way to convince people to move toward using less energy is a painfully high price.
in other words, it has to HURT, or people won't change their behavior.
though, sometimes, it's too late to change one's behavior.
i perceive imminent Doom, but i can also think like a Cornucopian.
imagine if we had just discovered oil, and that instead of finding 2 Trillion barrels, we only found 1 Trillion. that would still be a lot - a treasure beyond imagination.
we would still find clever things to do with it - transportation applications, petro-chemicals, plastics, etc.
the problem is that we're consuming as if we have Beverly Hillbillies amounts of oil - shoot a rabbit and it comes bubbling out of the ground.
if we would just learn to sip our oil, we'd make the transition to less oil with a lot less fuss. but that would mean things like, much of our transportation system would shift from road to rail.
it's 2011 and i'm surrounded by people who think it's Cool to Guzzle Oil, instead of sip it.
i guess they need more pain ... they haven't changed their behavior yet.
as far as oil futures trading, does anybody know any good primers or tutorials ?
i have listened to John Mauldin, Jim Puplava, and Eric King webcasts for a while, but they're never explained oil futures trading.
it was intereresting to see the effect of Saudi Arabia's "threat" to increase production, to hurt Iran.
http://oi55.tinypic.com/2lddtnl.jpg
WHAM ! oil plummeted from $95 to $91 - buoying the US $ in the process.
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Re: Oil Futures Traders Are The Problem
by peripato » Fri 24 Jun 2011, 09:59:23
$this->bbcode_second_pass_quote('Pops', 'I')t's OK guys, the fact that these guys manipulated the spot and derivative market to a slight extent doesn't change anything fundamental.
Well - except your insistence that those markets absolutely can't be manipulated.
Well - except your insistence that those markets absolutely can't be manipulated.
Pops,
The WTI futures contract has a daily average true range, or price fluctuation of around 1-3 dollars, depending on the volatility of preceding trading. In other words, by taking the high to low of that contract averaged over say 14 to 21 business days we can determine how far, on the basis of probability, price might move the following day. Traders use this estimate to determine stop loss placement and position sizing, so that they can a) ride out any short term movements against the trend, so they aren't immediately stopped out and b) determine a place where they can concede when their analysis of the direction of the market was wrong and gracefully exit their positions with a minimal loss, thus preserving capital.
That's 1-3 dollars and according to your estimation the manipulation of these guys moved the contract even less than that. Look, I'll concede that if you put on say, 10,000 to 15,000 contracts all at once, with the margin* required being quite phenomenal, (quite stupid really, as it alerts others of your presence), which may have occurred in this case, you can cause a jump, or gap in price action to occur, at least temporarily. However, as there are traders with an opposing view of the market, this gap in the price action will almost always be filled in over time, as their orders will have a downwards influence on the price that had, for a while anyway, been bid up by your oversized, all-at-once order.
* Margin; good faith money deposited with the exchange to cover daily fluctuations in value of ones open position in the market. Currently 1 NYMEX crude oil contract requires the deposit of $6750. So 10,000 would need $67.5 million just in margin! A lot of money...imagine how much margin is buttressing the other 1.5 million contracts in total?
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Re: Oil Futures Traders Are The Problem
by Pops » Fri 24 Jun 2011, 10:28:34
$this->bbcode_second_pass_quote('peripato', 'L')ook, I'll concede that if you put on say, 10,000 to 15,000 contracts all at once, with the margin* required being quite phenomenal, (which is really stupid, as it alerts others of your intentions), which seems to have occurred in this case, you can cause a jump, or gap in price action, at least temporarily.
That's all I've ever said. I've simply argued against the notion the markets are absolutely impossible to manipulate.
"Manipulation" is the basis of markets. OPEC does it openly, the US is doing it right now with the release from the SPR, drivers when they don't or do drive, farmers do it every year when they decide to "withhold" corn from the market by planting beans instead - or vice versa, unions by withholding labor when they go on strike, politicians when they bust unions or raise the minimum wage or...
Randian-Greenspandian "markets are perfect so its gotta be physical Peak" is way too simplistic - even for my simple little brain.
And btw that $.90 number wasn't my calculation it's straight from the indictment. Also these guys lost money on the spot trade in physical oil portion portion of the scam because they dumped it in the window to make their short pay.
But, what do think would have happened if they had sold it in the following month instead? Would the "shortage illusion" they had created held over do you think?
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
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