Star trader threatens to leave Citi

Quote from indahook:
Is it just me noticing, or is everybody who joined ET in 2009 really a fucking dimwit?
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No, that's about right. The only thing to keep in mind is that the hundreds of 2009 dimwit usernames you're seeing are actually about 6 or 7 guys who are creating dozens each. Do they have a life? Apparently not.
 
Thanks.

So basically the cost of storing, shipping, insuring, etc, is about $1 a barrel.

Yeah, I know I can do the spread. I was wondering about the sure thing :D

Quote from Anaconda:

You're making it more complicated than it is.

Light Sweet Crude Sep contract is trading around $63.40. The October contract is around $65.30. That's almost a 2 dollar per barrel difference, when the cost of receiving, storing & delivering is less than $1 per barrel, even with the markup the tankers are putting on right now since the contango is obvious. Every contract is 1000 barrels. Look at the volume right, 130k (sep) and 70k (oct). Execute 5k contracts in that spread, while netting $1 per barrell, that's $5 mil right there that you set up in a day. And with a 1-2 months turnaround, although if you're doing this on a regular basis, it's a monthly thing. It is quite scalable, so $800M is very possible if the spreads are there.

That is your arbitrage and you may put on the position to secure that profit but it also gives you options to hold the oil into later months if you see oil spike up.

Obviously, you need to do a certain minimum amount of contracts for the economies of scale to kick in. Let's not forget taking the delivery, which requires deep pockets.

Back in winter, the spread between the back & front month was like 8 dollars. That's HUMONGOUS money for the contango trade, almost impossible to imagine as the arb profits are so obvious even when it hits a couple dollars difference. I am sure every trading operation which plays contango went all in on that.

Without taking delivery, you can simply play on the contango via a spread trade, but it may bite you in the ass as the prices may not even come in line for a while.
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thanks for that explanation.

I had bits and pieces of it put together, but that was very concise.

that is why spend time at et.
 
Quote from nitro:


So basically the cost of storing, shipping, insuring, etc, is about $1 a barrel.
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It's actually less when the conditions are normal, but you need to understand that the companies providing the tankers, storage, transport, etc. will jack up their prices when demand rises and the contango starts attracting players.
If you don't get your storage secured in time, you can get screwed big time. That's why the big banks have been acquiring tankers or retaining long term leases to make sure they don't get stuck.
 
Quote from endsongs:

They should honor the contracts. These are energy commodity traders, which is probably a pretty difficult job. This isn't loan officer work, which anybody off the street can do. An employee is expected to generate around twice or more of his/her salary for a company. If these guys are making $200 million a year for the company, they deserve $100 million. It said these were pay packages and not bonuses. If anything, we should congratulate those traders for making so much fair and square at a time when others have lost so much.
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Yes, after all, these banks were so profitable...

They deserve $100 million for making $200 million? What kind of nonsense is that? See if they took on the full responsibility of operating their own fund, and raising the kind of capital that the bank provided, and took on all the risk and got that kind of return. How do you know it is not the volatility of the energy instruments that caused a lot of the return?

A lot of these bigtime traders are WAY WAY overrated.
 
Quote from indahook:

Is it just me noticing, or is everybody who joined ET in 2009 really a fucking dimwit?
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Eight is definitely there. I put him on ignore months ago.
 
Quote from Anaconda:

It's actually less when the conditions are normal, but you need to understand that the companies providing the tankers, storage, transport, etc. will jack up their prices when demand rises and the contango starts attracting players.
If you don't get your storage secured in time, you can get screwed big time. That's why the big banks have been acquiring tankers or retaining long term leases to make sure they don't get stuck.
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Yes, because banks using discount window capital to acquire oil tankers and arbitrage contango opportunities doesn't just smack of inefficiency. [/sarcasm]

This is exactly the problem with commodities futures markets.

If speculation drives up the futures price, it presents an arbitrage opportunity. BUT GUESS WHAT, buying all the oil in the spot market drives up the spot market.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.
 
Quote from PragmaticIdeals:

Yes, because banks using discount window capital to acquire oil tankers and arbitrage contango opportunities doesn't just smack of inefficiency. [/sarcasm]

This is exactly the problem with commodities futures markets.

If speculation drives up the futures price, it presents an arbitrage opportunity. BUT GUESS WHAT, buying all the oil in the spot market drives up the spot market.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.

And then what if you have another round of speculation because 'omg prices are skyrocketing!!!!' And futures increase.

And then the spot increases due to the arbitrage play.
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LOL. That's pure spec. The contango oil arbitrage trade will stop futures from increasing but won't stop spot from rising. In the end the two should be the same price as the cost to store the oil.
 
Quote from Anaconda:

Look at the volume right, 130k (sep) and 70k (oct). Execute 5k contracts in that spread, while netting $1 per barrell, that's $5 mil right there that you set up in a day.
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How do you execute in that spread? Buying the physical oil in september and selling it in october?
 
Quote from traderNik:

No, that's about right. The only thing to keep in mind is that the hundreds of 2009 dimwit usernames you're seeing are actually about 6 or 7 guys who are creating dozens each. Do they have a life? Apparently not.
More...

Agreed 100%

And this is why it's just about pointless to continue being a part of this website. And given Baron's most recent comments down in the Feedback forum, nothings going to change.
 
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