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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Paul Kern who wrote (102908)	6/15/2008 6:57:32 PM
From: skinowski	Read Replies (1) of 206181

what happens if more long players want to buy positions than there are shorts willing to sell them? Do the long players bid up the limited number of available short positions? Yes, but both the buyer and the seller will keep a weary eye on the cash market. By the time contract price departs to far up from the cash price, the buyers will get worried and slow down. Right now I think the price of oil will keep going up, but I would not pay $500 for oil one year out. It would have to be much closer to the current price. Where the buyer and seller meet, this is where the transaction takes place. say you own an oil well and when futures prices are high you sell future short positions to lock in profits. But suddenly, the value of short positions is going up parabolically. In the example you described, I am a Commercial hedger. If my short is making money, that means that the price is retreating - and my hedge worked. Win or lose, I would not be closing out my futures position, but would deliver the oil. As a producer, I would always be short. If I go long, I am no longer acting as a producer - but as a speculator.

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