Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Broken_Clock who wrote (101826)	5/30/2008 8:59:40 AM
From: Paul Kern	Respond to of 206325

All you commodity investors out there take note: crude oil is toying with contango again. I trade/invest mostly on the charts, not with I think should be, which is good because I get more and more confused by this oil market.

To: Broken_Clock who wrote (101826)	5/30/2008 12:30:32 PM
From: carranza2	Read Replies (1) \| Respond to of 206325

Here are the latest NYMEX tables for light sweet crude. If you wish to see more detail, click on the individual contracts. You can check all the other grades as well by roaming around the site. My suggestion is to ignore most of what is published by pros, look at the raw data, take in every data point you think might be reliable, then make up your own mind. nymex.com I find it very odd that the VLCC market is so strong at a time when demand is more or less stable. In fact, the prospect of lessened demand from the developed economies because of recession or slow growth suggests that perhaps VLCCs are being used for storage. Hoarding? Possible. Do I know so for a fact? No. But I don't think anyone would tell the small fry like us that it is indeed taking place. And hoarding, by its nature, ends at some point. There seems to be an unreasonable amount of speculation in a commodity which goes parabolic from February to June without any very good reason for the rise. Supply while not ample is not significantly short. This makes me think crude is poised for a correction. But since the long term trend is definitely up, such a short term correction may present one of the last buying opportunities we may see for a very long time. I am therefore out of oil for the moment. Waiting for a correction. Have taken profits, these won't disappear. But if I were long oil and the correction hits, it could be very nasty for my PF so rather than risk a big loss, I take smaller profits. And sleep well at night.

To: Broken_Clock who wrote (101826)	5/30/2008 12:37:41 PM
From: R2O	Read Replies (1) \| Respond to of 206325

A question about reporting of physical deliveries: (Sorry for the long winded post but I'm feeling particularly stupid about 'commodities futures' market and I need to start at the 2 year old's level. TIA) Say I bought 10 contracts WTI at $80 for delivery in July 08 and that I wish (or need) to take delivery of physical oil at delivery time. I would guess that I had to put up only margin to buy these contracts, yes? Perhaps $10/bbl. Say I now hold contracts committing the contract seller to supply me with oil at $80 in July 08. I have put up the margin to secure my side of the contract. What does the seller put up? Who indemnifies me against seller's failure to deliver? The buyer of the contract (I would guess) has an obligation to take delivery of and pay for the physical. Who indemnifies the seller for failure to pay and take delivery? If I sell the contract and a subsequent contract holder has no desire (or means) to take delivery, who absorbs the risk? Are these contracts priced/traded like (european) stock options i.e. that I could sell my interest in $80 Jul 08 contracts for whatever a buyer would pay any time prior to expiration? Note that (like stock options) the delivery price and date are parameters of the contract not the market. For each expiration date there ought to be all sorts of delivery prices, as there are strike prices for stock options. Why does one only see the present value (and delivery/expiration date) of the contract and never the delivery price? Say when delivery time comes I have the cash on hand to pay the balance for the delivery. The seller of the contracts now has to make good on the delivery of physical oil. Let's say that at delivery time oil is going for a spot price of $130.00/bbl. 1. How is this sale reported and to whom? Where can I get the data? Note the I, the party taking delivery, am only paying $80/bbl but (say) yesterday the 'contract' was selling for $130. 2. How would a failure to perform (either party) be reported, at what price, and to whom? Where can I get the data? On a very superficial macro level the entire commodities market seems to have some characteristics of the CDO market: There is a need to put a lot of money to work so we bend the world by creating what's needed ( separation of risk and consequence, demand, novel trading methods, instruments, etc.) and quickly disappear with the profits. The shift from backwardation to contango made the money bucket a lot bigger very quickly. It took me a long time to see how to make money by having folks default on mortgages. I feel I'm missing something really important about rates of change and how to pour money. TIA for anybody that may answer. R.