Interesting and Humour - page 4677

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Реter Konow:
You see, an electronic exchange-traded futures does not imply any delivery at expiration. This is a mistake. I asked my broker and the terminal itself (TWS) told me that open positions in the futures at the time of expiration will automatically close at the market price. That's it - that's the end of the matter. No deliveries.
The essence of an exchange-traded "futures contract" is radically different from a real futures contract, and the same name causes wild confusion.
The version you describe is technically correct - buyers have closed long positions en masse by collapsing the price (think about who they abruptly sold all their contracts to when there are no other buyers). But the rest of the interpretation is wrong. No physical delivery threatened anyone.

Learn the math. Futures contracts can be delivery contracts and settlement contracts. In the case of a deliverable contract, delivery after expiration is mandatory; in the case of a settled contract, the settlement takes place between the counterparties.

In the specific case of WTI, the delivery contract expiring on April 21 has gone into the negative zone. It is unclear how the exchange allowed the price to fall below zero, as far as I know, there has never been anything like that in history.

 
Vitalii Ananev:

Learn the basics. Futures contracts are either deliverable or settled. In the case of a deliverable contract, delivery is mandatory after expiration; in the case of a settled contract, settlement takes place between the counterparties.

In the specific case of WTI, the delivery contract expiring on April 21 has gone into the negative zone. I do not know how the exchange has allowed the commodity's price to fall below zero, as far as I know, it has never happened before in the history.

Well, as a maturity expert, which futures were you talking about? Deliverable or settlement?)) The brokers I know don't support deliverable futures. Name a broker that supports deliverable futures. And name a platform where you can trade deliverable futures.

I am convinced that deliverable futures contracts are made but not traded hand-to-hand. Prove me wrong.
 
Реter Konow:
Well, as an expert, which futures are you talking about? Delivery futures or settlement futures?) The brokers I know do not support deliverable futures. Name a broker that supports deliverable futures.

Google will tell you all the possible brokers. Any of them will allow you to trade both delivery and settlement contracts.


 
Реter Konow:
....

I am convinced that deliverable futures contracts are entered into but are not traded hand-to-hand. Prove me wrong.

I'm not going to prove you wrong. Open a brokerage account, buy a deliverable futures and wait for expiration.

 
Vitalii Ananev:

I'm not going to prove anything to you. Open a brokerage account buy a deliverable futures and wait for expiration.

And nothing will happen. The US IB does not support contracts with physical delivery. It requires complex legal controls and a lot of paperwork. Who will do that when its clients are all over the world? The position will close at market price, without your involvement, and no barrels of oil will be sent to you. You have shown just printed words in a picture.
 
Реter Konow:
What do you mean, "nobody wants delivery of real oil"? A futures is a legal document by which one party agrees to buy an agreed volume of a commodity at a specific time and at a fixed price, and the other party is obliged to sell and deliver it. Notions of "want/don't want" are irrelevant here.
It is not the price of oil that has collapsed, but speculators' expectations expressed in numbers.

Expectations are traded on the exchange, not real futures contracts.

Even in theory, it is impossible to trade a real futures contract because the contract spells out the legal entities that enter into the contract. It makes no sense to register the futures contract with the bearer, because the liability of the parties to each other will disappear. So, the question is - what do they trade at the stock exchange? )))

It turns out that the futures contract at the stock exchange is an electronic right to wager on the course and direction of forecasts of other speculators.

That's right, a deliverable futures contract where no one wants to deliver and everyone drops it and the price falls wildly...

 
Uladzimir Izerski:

And if you collapse the dollar, the price of oil in dollars will go up.

The dollar has become so expensive that the price of oil has dropped to zero)))

We should print more dollars. After all, it's expensive. More of it, more of it.

Reptiloids won't allow it ))))

 
transcendreamer:

That's right, deliverable futures where no one wants to deliver and everyone drops it and the price falls wildly...

You can't drop a legal contract with names, date, volume, goods, costs and so on. And it cannot be re-bought and resold. This breaks the concept of an agreement (contract). You cannot, on the basis of an electronic purchase position, become a real party to the contract for Real delivery and be REALLY responsible for breaches of the prescribed terms. A broker will not be able to control the correct execution of all electronic contracts, wandering in the hands of traders from all over the world. Therefore, the deliverability of goods at the click of the BUY button is a fiction which some people believe in. Although brokers say there is no delivery, sorry.

Stocks are another matter. They are really bought and sold on electronic platforms. They are held in escrow. But, shares are not tied to the owner's obligations, the fulfilment of which requires serious procedures and controls.
 
Реter Konow:
You can't dump a legal contract with names, date, volume, product, costs and so on. And it can't be re-bought and resold. This breaks the concept of an agreement (contract). You cannot, on the basis of an electronic purchase position, become a real party to the contract for Real delivery and be really responsible for violations of the prescribed conditions. A broker will not be able to control the correct execution of all electronic contracts, wandering in the hands of traders from all over the world. Therefore, the deliverability of goods at the click of the BUY button is a fiction which some people believe in. Although brokers say there is no delivery, sorry.

Stocks are another matter. They are actually bought and sold on electronic platforms. They are held in a depository. But, shares are not tied to the owner's obligations, the fulfilment of which requires serious procedures and controls.

no one is dumping them, but you can legally sell futures

 

The lowest prices were set by trading in futures, contracts in which the buyer fixes a purchase at a certain price at a certain time. Futures are not only a tool for oil consumers to hedge against price fluctuations, but also a means of speculation. The contracts are valid for a certain period and traders who do not want to close positions or take delivery usually extend the contracts shortly before they expire. The May delivery contracts expire on April 21, which put traders whose contracts are due to expire the day before under extreme pressure. They were better off selling oil at a negative price than filling the tanks, although the market collapse reached such a magnitude that WTI, Mars Blend, LLS and HLS crude did trade at negative levels on the physical domestic market.

The reason for the collapse in May futures prices is that investors got out of the contract before it expired, due to a lack of demand for physical oil. When the futures expiry time approaches, investors must decide whether to take delivery of the contract or roll over into the next contract (of a later month). This is called a rollover, and in normal market conditions there is no problem with moving from the expiring futures to the next one in time.

However, this time there was in fact no possibility of finding counterparties for the rollover who would be willing to buy the futures from the holder and take delivery of the contract. US energy companies simply do not have enough storage space for oil. No one wants to buy a contract that expires tomorrow and obliges them to take delivery in May. Even offers to pay five, ten, twenty or even thirty dollars a barrel to buy such futures have not generated much demand.


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