People investing in futures do this every day, and some of them are most certainly credible.
If it were possible to do significantly better than blind luck in speculation about future prices then there'd be nobody around to take the other side of the contract.
Keep in mind, though, that when you buy a future, the price of that future already has expectations factored into it.
It's very easy for individual traders to get slaughtered in the futures markets; you're essentially betting against other market participants, some of whom may have vastly better access to information than you do.
I would be very wary in assuming that the market is underpricing something based on information in the Guardian; it's fair to assume other market participants read it as well, and the information has been built into the prices already by market makers.
People investing in futures do this every day, and some of them are most certainly credible. Southwest Airlines, e.g., seems to be pretty good at saving a buck with aviation gas futures (though that is a step removed from crude oil).
Probably no one. This is very common, and you don't know why people trade futures, in the sense that you don't know why was this or that trade executed. A lot of that activity is institutions hedging their portfolios.
It's like when people get excited that someone buys a LOT of put options on, say, Apple. But you don't know that someone's portfolio! Perhaps they already own a ridiculous amount of Apple stock. And the option seller may instantly hedge by getting an appropriate amount of short AAPL.
Not trying to upset you, just trying to help you see that the story is not crazy. I'm not sure if you've tried trading futures or options before.
I've never traded futures, but I've seen with the amount of leverage that options provide makes the story quite believable (easy was probably not what the prior commenter meant).
All of what you say could be true - I just find it hard to believe given IRL finance bros are constantly trading and profiting off of futures/commodities trading without a single worry of the underlying commodity.
It is fascinating that you say you don't understand how something could be possible and that you are weary of articles that blame X for everything and yet you can't be bothered to spend 10 minutes to read an entire article.
It shouldn't be so hard to see that a round trip trade where one firm sells a commodity to another and then buys it right back at the exact same price would have some sort of influence on the market. If it did not, what would be the point of such a trade? A large enough group of firms could effectively support whatever price they wanted assuming the market was reasonably rational.
Because the underlying asset never changes hands, the pricing is naturally suspect. Futures trading in an non-manipulated market is far from riskless but if you can manipulate the market over the short term of the contract (say 6-18 months), it certainly can be effectively riskless.
There are many more points of interest in the article that you were unwilling to read but very willing to comment on.
It’s not about high or low to lock in profits, they sell futures well in advance to eliminate uncertainty and hedge their naturally positive position. The speculator buying the future takes on that risk.
That is the point I was trying to make. Basically if you're in the business of producing or buying and selling the commodity the futures are for you. If you're just speculating how does that help anybody? I guess you could make the argument that having more eyes on the market means there is more information so the price is a better reflection of the true value.
Sure corporations use futures to ensure stable prices but there are also traders that specifically just trade futures without any hope for receiving the underlying commodity.
the article says the futures are still trading high, meaning you probably couldn't make a lot of money buying them right now, likely because traders know the prices are going to come up too.
Indeed. But with a futures market, they will be able to speculate in both directions. Futhermore, businessmen who rely on the BTC <--> USD price will be able to buy futures, and be able to settle down on a future spot price on BTC.
IE: A business expects to get say 10 BTC in 30 days... but wants the money in USD. So he wants to buy a contract to sell 10 BTC 30 days from now. It can even be in the form of call / put options.
A vibrant speculative community will provide these businessmen with contracts. And then everyone benefits. Speculators will begin to add value to the market. As opposed to now, where all of them seem to be relying on the greater fool theory.
yeah, this just makes the whole business of futures trading seem like a scam where the people actually interested in the things being traded are pawns.
Both sides can certainly win in a futures contract and often do. A farmer sells his future crop now at a discount so he can buy fertilizer he couldn't otherwise afford, but without which there would be less crop to sell. Meanwhile the future crop buyer gets the crop at a discount. Win-win.
Pure financial derivatives trading can generate absolute winners and losers, but they know that getting into the game, and the advantage for commercial participants is that the 'gamblers' increase liquidity in the market.
Nah. CME futures are notorious for increasing volatility. See: the flash crash [1]. And: a bazillion other examples. These "professional" traders aren't playing any kind of fair game.
If it were possible to do significantly better than blind luck in speculation about future prices then there'd be nobody around to take the other side of the contract.
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