I answered you already. Expectations of future higher spot prices. You again did not get my point
$3.6bn crude bet puts price on stupidity
- Thread starter themickey
- Start date
Sure and why are you not loaded up to the hilt on the short side? Please show me all those funds that made a killing last month. One of the largest oil traders in the world just went bust.
Who are you two clowns anyway?
Who are you two clowns anyway?
Backwards, it is you not getting anyone else's points. You know it all. C ya.
I answered you, twice. The two clowns here are the ones with the hat on. You never even understood my first post. And good suggestion, waste of time to further converse with you.
I never stated, claimed, nor hinted that futures in contango replicate future spot prices, return profile wise. Just for the record.
I never stated, claimed, nor hinted that futures in contango replicate future spot prices, return profile wise. Just for the record.
You claim your point isn't being addressed, but the problem is you don't really have a point. All you have done in this thread is project your belief that everyone else but you is a moron. Everyone here understands how PnL is accounted in futures trading. When you say that rolling futures during contango doesn't cause the losses, this is only true in a narrow sense - basically you are just being pedantic. The loss is realized upon rolling, even if it's not caused by the rolling or by the fact that contango exists at the time of the roll. You are not making a deep and interesting point by criticizing the precise language being used to describe the process by which negative carry translates into losses.
WRONG. Ofcourse it has impact on returns. Are you too dumb to understand, that you sell at 8 and then buy at 10? Which means price has to rise 25% and you still do not make any money in 30 days. And the next month even is spot rises 25 %, is now at 10, you sell it with 0 profit, roll to next month and buy at 12, while spot is still at 10. So oil again rises this month 20 % going from 10 to 12, and again, you made 0 profit. Or translated to USO, NAV stayed the same, while spot went higher first month from 8 to 10 and second month from 10 to 12? Price went from 8 to 12 or 50 % while you made 0% return. So how is author wrong? USO faces huge headwind because everyone buying it is thinking exactly how I explained in my previous post. Wee oil is so low, lets but it here at 15$ and sell it in 2 months when oil will it will surely be at least 20$. And it 2 months oil is 20$ and they have 0% profit, becuase USO had to close one month and roll to another which was already trading higher, and then again the same.. If you do not understand that then I am not sure you ever traded oil futures. Or at least not for a long time.. Daytrading or holding for a few days is fine, you do not care for contango. Maybe this is what you have in mind, but author is correct. USO face huge headwidn and IT DOES EAT AWAY RETURNS FOR INVESTNG. INVESTING IN IT! READ THIS 20 TIMES.. USO AS INVESTMENT not USO which you buy today and sell tomorrow, and again buy tomorrow and sell in 2 days.. PEOPLE WANT TO INVEST IN USO TO MAKE GAINS WHILE SPOT OIL GOES UP. AND YES THEY WILL FACE HUGE HEADWIND BECAUSE OF CONTANGO. CONTANGO WILL EAT AWAY PROFITS. AUTHOR IS 100% COREECT!
HAHAHAH HOW fucking dumb are you pal? Who said those HF made any returns.. You ary trying to convince people that carry positive or negative does not affect returns and I am telling you that there are strategies HG run that try to make money out of contango or backwardation. Is this 100 % locked in return? of course not.. This is one of the strategies like trend following is one of the strategies and you hopefully understand that each of those just tries to exploit a little edge that strategy brings. But just as TF has periods where it fails spectacularly so do carry strategies.. But still you dont think they would do them if there was no edge in them?
And this is the sole reason why USO tracks spot oil price so badly in steep contango. If this is not the reason you smart ass, then please check USO vs oil price for last 10 years and tell me why USO is underperforming. There are actually times where it is outperforming and well look at that, its when market are in backwardation. Then just check performance oil vs USO while in contango. And explain why oil went up 100 %, uso went up 30 %. Where is the rest? Contango is not the reason, so where did 70% return go. Costs are 1 % so where are other 69%?
Here is another story behind the story via Shah Gilani, who has seen just about everything over the decades:
The real question then should be who were those speculators in USO?
There were plenty of U.S. investors speculating on the price of oil by buying USO. How many we don’t know.
What we do know is there were at least 60,000 Chinese “retail” investors playing the same game.
It hasn’t come out yet, and we may never know, whether contract selling by the USO managers, which had to rollover the April futures contracts they’d bought on behalf of USO shareholders on the last day of trading into May futures (the “rollover”) caused the implosion, or whether other futures sellers who were likewise “long” the contracts up to the last day and had to sell, and they were to blame.
More than likely, it was both. And more than likely it was mostly Chinese retail speculators who got burned.
Chinese mainlanders can’t buy USO, but they can buy Chinese “me too” products. And boy did they ever.
China’s big banks, and smaller ones too for that matter, create “wealth management products” for their depositors and any customers who want to buy them. There’s a whole, very long and sordid story to tell about wealth management products, and I’ll tackle that another time. Suffice it say, several giant banks created Yuan You Bao, or “crude oil treasure” products for their retail customers.
https://totalwealthresearch.com
The real question then should be who were those speculators in USO?
There were plenty of U.S. investors speculating on the price of oil by buying USO. How many we don’t know.
What we do know is there were at least 60,000 Chinese “retail” investors playing the same game.
It hasn’t come out yet, and we may never know, whether contract selling by the USO managers, which had to rollover the April futures contracts they’d bought on behalf of USO shareholders on the last day of trading into May futures (the “rollover”) caused the implosion, or whether other futures sellers who were likewise “long” the contracts up to the last day and had to sell, and they were to blame.
More than likely, it was both. And more than likely it was mostly Chinese retail speculators who got burned.
Chinese mainlanders can’t buy USO, but they can buy Chinese “me too” products. And boy did they ever.
China’s big banks, and smaller ones too for that matter, create “wealth management products” for their depositors and any customers who want to buy them. There’s a whole, very long and sordid story to tell about wealth management products, and I’ll tackle that another time. Suffice it say, several giant banks created Yuan You Bao, or “crude oil treasure” products for their retail customers.
https://totalwealthresearch.com
Rabobank has put together a special report on The Oil Whale available for download:
The recent and erratic moves in oil prices have highlighted the growing influence and significant impact passive funds can have on commodity and financial markets The rise of commodity ETFs over the past decade has led to a surge in retail participation in what was once difficult to access commodity futures markets The USO fund has attracted a great deal of regulatory scrutiny in the wake of the negative oil price settlement given its whale-like status in nearby Nymex WTI futures contracts USO, the exchange traded fund was forced to restructure its holdings in an effort to reduce systemic risk to markets
https://research.rabobank.com/marke...d.ecom.publication.domain.Publication-2518174
The recent and erratic moves in oil prices have highlighted the growing influence and significant impact passive funds can have on commodity and financial markets The rise of commodity ETFs over the past decade has led to a surge in retail participation in what was once difficult to access commodity futures markets The USO fund has attracted a great deal of regulatory scrutiny in the wake of the negative oil price settlement given its whale-like status in nearby Nymex WTI futures contracts USO, the exchange traded fund was forced to restructure its holdings in an effort to reduce systemic risk to markets
https://research.rabobank.com/marke...d.ecom.publication.domain.Publication-2518174