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Politics : Politics for Pros- moderated

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To: skinowski who wrote (256226)	6/30/2008 3:47:22 PM
From: skinowski	Read Replies (2) of 793896

This hypothetical example started with someone selling a 6 months out contract for $160, and "hedging" the short exposure by buying spot oil at $140. Even if 6 months later the spot price is... 100, you already received for it $160. That's why this example was meant to illustrate the fact that prices of futures are "anchored" to the spot price, and the idea of hoarding for the purpose of hedging would not work. Ergo - the notion that futures "investors" bid up spot prices to any meaningful extent is a chimera.

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