Another point to think about…it’s a simple one! We really did have a commodity’s price below zero! Let’s set aside what this does to Technical Analysis, Risk models, options, etc… We have today the same circumstances that caused WTI Futures to go below zero in the first place. The supply/ demand imbalance, the limited storage capacity at Cushing and the global oil market situation. Some criticised allowing of prices to move below zero and we’ve seen a moratorium on trading for some (read Retail) clients or else severe margin restrictions. This led to a recent staff advisory from the CFTC reminding market participants ‘…they are expected to prepare for the possibility that certain contracts may continue to experience extreme market volatility. Low liquidity and possibly negative pricing.’2
What was more
interesting and worrisome was the added footnote ‘…wasn’t intended to suggest that any particular markets or contracts will experience fundamental or technical issues.’2 which is scarier.
I don’t know
A. Having one contract go sub-zero.
B. Have it possibly repeated.
C. Having some other commodity likely to go sub-zero.
2 Reported Marketwatch 13 May 2020
There has been the usual speculator bashing going on. Not that it hasn’t been undeserved in some cases. However, the role of the speculator as a risk taker…at a price…from a hedger is essential to any fully viable operations on any exchange. We’ll likely see stricter, Federally enforced, position limits. Hedgers will, of course, not be so restricted…but when one can trade OTC and then ‘hedge’ that position on exchange…the line gets blurry.
These are just some observations for a life below zero. Personally, though I like winter and I’ve been in harsh temperatures in a Russian wintertime, I’ve still liked it when the weather turned milder.
Eddie Tofpik E:
eddie.tofpik@
admisi.com T: +44(0) 20 7716 8201
11 | ADMISI - The Ghost In The Machine | Q2 Edition
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42
