Monday, April 20, 2020

Negative Oil (Futures) Prices! — Brian Romanchuk


When we think of a "squeeze" we usually assume "short squeeze." However, the collapse in WTF price is apparently due to a long squeeze.
The main lesson to be taken away is for financial speculators. If you are incapable of taking delivery of a futures contract, you should be asking yourself exactly why you are trading the product. One of the standard trade strategies I saw in sell side research back in the day was hedging breakeven trades with oil futures. Although that looked cute, there was no way to deal with delivery, so I didn't pay much attention. Thanks to modern technology, it is possible to pretend that you are a hedge fund trading futures at home. However, just because a thing is possible, it does not mean that it is a good idea.
Bond Economics
Negative Oil (Futures) Prices!
Brian Romanchuk

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