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Please define flipping a security when you're holding a futures contract for the near month. You need to step back and understand the totality of the complex fi
by lrm242 17y ago
Please define flipping a security when you're holding a futures contract for the near month. You need to step back and understand the totality of the complex financial markets before you presume to understand peoples motivations by dictating to them how long they should hold a financial instrument. People use the markets for varying motivations and their holding periods are one, of many things, that vary.
- losvedir 17y agoWhy are you holding the contract? You're an airline hedging against rising oil prices? You're a multinational corporation locking in a reasonable exchange rate when dealing with overseas manufacturers? You're a speculator who thinks the market isn't properly anticipating the impact of a weather pattern? All these seem fairly reasonable to me. I define a "flipper" as someone whose sole purpose in owning a security is to pass it off at a higher price to another "flipper" down the road. It was an offhand comment and my terms were non-standard, I apologize. I wasn't so much defining "flipper" by the length of time one holds a security, but the motivation for doing so. If most of the trading boils down to huge groups of firms selling back and forth to each other, it doesn't seem to matter to me whether the spreads shrink or not. It's a zero sum game and it's just a matter of one side ekeing out more money or the other.
- yummyfajitas 17y agoWhat you call "flipper" is normally called a "speculator". Also, speculators add value to the market because they push prices toward the true values. If an asset is expected to be more valuable in the future, speculators will buy it now, raise the prices, thereby encouraging consumers of that asset to use less of it. This ensures that more is available for future use. Also, speculators also add liquidity for consumers. Unless demand for a long hedge exactly matches demand for a short hedge, you need speculators to pick up the slack.
- dhume 17y agoAlso, speculators add value to the market because they push prices toward the true values. Like what the people flipping houses did to housing prices?
- deleted 17y ago[deleted]
- joelhaus 17y agoBest of luck in your attempts to radically alter basic human nature and the foundations underlying the theory of evolution. Practical measures can be put in place to mitigate the negative affects of marketplace irrationality, but please do not behave as if people lack a profit motive. This extreme Ayn Rand style thinking is what drove our economy into a ditch in the first place.
- anamax 17y ago> I define a "flipper" as someone whose sole purpose in owning a security is to pass it off at a higher price to another "flipper" down the road. Huh? The vast majority of people own stock because they think that they'll be able to sell said stock for more money later. (Yes, they'll take dividends along the way, but since there are short-term traders who "harvest" dividends, that doesn't change things.) With bonds, there are folks who plan to hold to maturity, but they're in the minority. Other folks are just looking for fixed income for "a while" until they come up with something else to do with that money. > If most of the trading boils down to huge groups of firms selling back and forth to each other, it doesn't seem to matter to me whether the spreads shrink or not. Sure it does - you benefit from the decreased spread whenever you trade. If you really think that the spread doesn't matter to you, feel free to throw $1/share my way every time you buy or sell.