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There's a reason futures can go negative, that is when the contracts get close to expiry, the holder becomes legally liable to receive the oil. Since the specul
by beejiu 5y ago
There's a reason futures can go negative, that is when the contracts get close to expiry, the holder becomes legally liable to receive the oil. Since the speculators have no way to actually do this (and that storage was at capacity anyway), it makes sense to sell to shift the liability to someone else. There is not such analog for shares that I can see.
- throwaway2037 5y agoYou wrote: <<the holder becomes legally liable to receive the oil>> Very good point! We should be clear for other readers: For many commodities futures, there are two types: physical and cash settle. (From my experience, liquidity can vary wildly!) Example: Physical oil futures require you to deliver (short)/receive (long) oil at expiry. Cash (settle) futures only require an exchange of cash at expiry.