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There is no physical commodity changing hands unless the futures contract is held to expiry and delivery takes place. It's not like this product enables specul
by short_sells_poo 6y ago
There is no physical commodity changing hands unless the futures contract is held to expiry and delivery takes place.
It's not like this product enables speculators to hold on to water reserves better than they can currently. They'd have to have vast warehousing capabilities (or some lakes?) to actually sit on the physical product.
Sure, they can try to push the prices by cornering the liquidity in the futures market, but again, to actually have a sustained impact, they'd have to create a shortage in the physical market. This won't change with these derivatives.
- zaptheimpaler 6y ago> It's not like this product enables speculators to hold on to water reserves better than they can currently. The presence of a liquid market where they can sell at low friction at all times is a big incentive to speculate. It’s the difference between speculating on rare trading cards or exotic wines and stocks.
- short_sells_poo 6y agoI disagree with your statement on multiple levels. First, a highly liquid market tends to make speculation less profitable because your opportunities are arbitraged away that much more rapidly. Second, speculators are not necessarily bad and add further liquidity to a market by taking the side that others may not be willing. Third, a liquid market will of course still have speculators, but will be less vulnerable to distortion from truly malicious actors because it is more difficult to move a highly liquid market. An illiquid and opaque market is worse in almost every sense. When things get bad, price discovery is much more difficult and bad actors can actually have outsized influence by cornering what little liquidity there is. You seem to be biased against speculators, but the actors you should be actually biased against are market manipulators.