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TheSpaniard

Oil trades on the market

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I was reading an article last week about a "rogue" oil trader working for a firm in London who apparently lost something like 10 million of the firms bucks over night. In that article it said that oil is traded in groups of 10,000 barrels. Did I read that right. If I want to invest and directly buy oil futures I need to shell out the cash for 10,000 barrels? I can't seem to find anything to back this up but it was in the article and it was the first time I heard this.

 

I know I can join say a hedge fund that pools a lot of people's money together.....but maybe this is the main reason our commodity markets and even the stock markets are so screwed up. Apparently, this one guy at the firm was able to cause the market to move 5% basically on his own..... It's never good when one entity can move the market so much. Just think what 3,4,5,6,7,etc hedge funds basically working together to push prices higher can do....Well I guess we already know that.....140 a barrel.

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1,000redface.gif..... Either I'm off a bit or the article was. Eitherway, 1,000 barrels @ 65.00 is still a 65K investment.....Not totally out of reach but I guess it is for most people.

 

Still, Is it a bad thing when one hedge fund, or one oil trader can swing the market 5% or more? Just doesn't sound like a good system. What happens if all the players in the market just keep pushing higher? The only ones in the market who would be pushing lower would be the places that actually plan to take delivery like airlines/etc...

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you don't need to buy oil futures to be in oil.

 

you can buy an ETF (like a stock), which is a fund that buys positions in oil futures.

 

ticker symbol: USO

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"ticker symbol: USO"

 

I figured you would have the answer on this Fishweewee. I guess there is also a ticker for shorting oil as well?

Let me ask this though. Why not lower the amount of barrels needed to buy down to say 100. Wouldn't that allow more competition into the oil market without having to go through a middle guy?

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Many commodity futures are designed for commercials, people who actually take delivery of the goods and use futures markets to hedge. I don't think anybody is going to consider reinventing the market to make it more accessible for the retail spec customer. That's why you have ETFs

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View PostMany commodity futures are designed for commercials, people who actually take delivery of the goods and use futures markets to hedge. I don't think anybody is going to consider reinventing the market to make it more accessible for the retail spec customer. That's why you have ETFs

 

 

NYMEX has e-miny oil futures (ticker QM) for the small guy specs. They've been around for a while.

 

The vast majority of futures positions are entered into by financial speculators and then closed out without taking delivery.

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Which is a big part of the problem- make it mandatory you take a minimum delivery of say 15% all trades and the speculators that drive markets up, will be ousted.

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View PostWhich is a big part of the problem- make it mandatory you take a minimum delivery of say 15% all trades and the speculators that drive markets up, will be ousted.

 

 

the problem is not the specs.

 

the problem is our government.

 

in general, the price of commodities, especially those we import, expressed in U.S. dollars, is inversely related to the value of the U.S. dollar.

 

weak dollar = stronger commodity prices

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"a surefire recipe for gasoline shortages."

 

Is that because the price would go lower and countries would stop pumping from the ground? I guess the shortages would take place once demand came back on?

 

Saudi says the world needs 75 a barrel to sustain new development of fields. Of course it only costs the Saudi's like 3 bucks a barrel to get the stuff from the ground. Other places it's 60-80. I think Iran has been choking big time with current prices.

 

John

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if you want to "trade" oil, take a look at USO, UCO/SCO, DIG/DUG and DXO, USL. these will "track" oil the best and you wont have to worry about someone delivering barrels of crude. obviously, do your homework first, etfs arent for everyone, insert disclaimer here...

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