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I'm surprised IB let speculators trade in a contract going to delivery. I worked as a risk manager in a commodity trading firm and only hedgers qualified to tak

by flint 6y ago

I'm surprised IB let speculators trade in a contract going to delivery. I worked as a risk manager in a commodity trading firm and only hedgers qualified to take delivery were permitted to hold contracts going to delivery.

everlost 6y ago
Wasn't this a cash settled contract?
- whatok 6y ago
  No.
  - jdadj 6y ago
    It's not a cash settled contract. "Delivery shall be made free-on-board ("F.O.B.") at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage." Source: https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html https://www.cmegroup.com/trading/energy/crude-oil/light-swee...
  - mathgenius 6y ago
    It may have been ICE's crude contract, which is cash settled: https://www.theice.com/products/213/WTI-Crude-Futures https://www.theice.com/products/213/WTI-Crude-Futures "The West Texas Intermediate Light Sweet Crude Oil futures contract is cash settled against the prevailing market price for US light sweet crude."
    - whatok 6y ago
      Sure, but a majority of trading was done on CME futures. In either case, you still ran into the issue of negative prices. USO only recently started explicitly stating that they would also potentially invest in ICE futures alongside CME futures.
- mostlymeme 6y ago
  Yes
mrlala 6y ago
IB automatically closes out your position before delivery can happen if you don't close it out.. so not sure why you are surprised IB lets them trade? >I worked as a risk manager in a commodity trading firm and only hedgers qualified to take delivery were permitted to hold contracts going to delivery. Ehh.. what? I've been part of a CTA for many many years, we have trading programs.. our clients trade in our programs.. the entire industry never takes delivery yet trades all these contracts which have delivery (metals, ags, energies). Very confused what you are talking about.. everyone rolls out of these before first notice dates.. brokers are on your back a week before the FND are coming up.
mostlymeme 6y ago
They are cash-settled.
- flint 6y ago
  They are deliverable https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html https://www.cmegroup.com/trading/energy/crude-oil/light-swee...
  - mostlymeme 6y ago
    That's no the contract in which IBKR has lost money. These are: QM NYMEX, and WTI ICE. Both cash-settled.
    - 0x8BADF00D 6y ago
      CL is not cash settled, it is physical delivery. It is traded on NYMEX.
      - analyticstime 6y ago
        IBKR doesn't allow to trade CL in the day of settlement, only cash-settled contracts: QM - https://www.cmegroup.com/trading/energy/crude-oil/emini-crude-oil.html https://www.cmegroup.com/trading/energy/crude-oil/emini-crud... WTI - https://www.theice.com/products/213/WTI-Crude-Futures https://www.theice.com/products/213/WTI-Crude-Futures

by flint 6y ago

everlost 6y ago

Wasn't this a cash settled contract?

whatok 6y ago
No.
- jdadj 6y ago
  It's not a cash settled contract. "Delivery shall be made free-on-board ("F.O.B.") at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage." Source: https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html https://www.cmegroup.com/trading/energy/crude-oil/light-swee...
- mathgenius 6y ago
  It may have been ICE's crude contract, which is cash settled: https://www.theice.com/products/213/WTI-Crude-Futures https://www.theice.com/products/213/WTI-Crude-Futures "The West Texas Intermediate Light Sweet Crude Oil futures contract is cash settled against the prevailing market price for US light sweet crude."
  - whatok 6y ago
    Sure, but a majority of trading was done on CME futures. In either case, you still ran into the issue of negative prices. USO only recently started explicitly stating that they would also potentially invest in ICE futures alongside CME futures.
mostlymeme 6y ago
Yes

mrlala 6y ago

IB automatically closes out your position before delivery can happen if you don't close it out.. so not sure why you are surprised IB lets them trade? >I worked as a risk manager in a commodity trading firm and only hedgers qualified to take delivery were permitted to hold contracts going to delivery. Ehh.. what? I've been part of a CTA for many many years, we have trading programs.. our clients trade in our programs.. the entire industry never takes delivery yet trades all these contracts which have delivery (metals, ags, energies). Very confused what you are talking about.. everyone rolls out of these before first notice dates.. brokers are on your back a week before the FND are coming up.

mostlymeme 6y ago

They are cash-settled.

flint 6y ago
They are deliverable https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html https://www.cmegroup.com/trading/energy/crude-oil/light-swee...
- mostlymeme 6y ago
  That's no the contract in which IBKR has lost money. These are: QM NYMEX, and WTI ICE. Both cash-settled.
  - 0x8BADF00D 6y ago
    CL is not cash settled, it is physical delivery. It is traded on NYMEX.
    - analyticstime 6y ago
      IBKR doesn't allow to trade CL in the day of settlement, only cash-settled contracts: QM - https://www.cmegroup.com/trading/energy/crude-oil/emini-crude-oil.html https://www.cmegroup.com/trading/energy/crude-oil/emini-crud... WTI - https://www.theice.com/products/213/WTI-Crude-Futures https://www.theice.com/products/213/WTI-Crude-Futures