5 ms·

The short sellers got margin called, so they are forced to buy Nickel to cover their short positions.

mrleinad 5y ago
Well, it's part of the game, isn't it? Or if I buy and expect it to go higher, they'll rollback and reimburse me if it falls?
- lbarrow 5y ago
  The exchange being able to roll back trades in extraordinary circumstances is also part of the game. The exchange obviously has a strong incentive not to abuse this power or the traders will find another exchange.
  - djbebs 5y ago
    It really isn't, and the fact that this is the first time it has happened shows that its not.
daniel-cussen 5y ago
If your team loses the basketball game, the rest of your high school hates you. If you lose your job, you lose your health insurance. If you bet on the wrong part of the roulette wheel, you lose your chips. If you miss your rent, you get evicted. In all these endeavors, if you screw up you suck up the consequences, end of story. I feel literally no pity for traders who got margin called, they're forced to buy nickel to cover their short positions but they're just not worthy victims, they're debtors. And these are expensive people, these traders took out those loans to buy proof of their superiority, like cars, houses, jewelry for wives and affairs, investment-type goods like watches...maybe one of them was smart enough to buy Magic cards, but if they get short-squeezed, I doubt it. To my knowledge these traders are consenting adults, 18 and up surely, they gambled and won and took their money, this time they gambled and lost. They have to pay, with nothing but silence from them.
- lbarrow 5y ago
  That logic runs both ways, you could just as easily say: Well, the short squeeze traders knew the risks - they knew that LME had the legal authority to cancel trades in extraordinary circumstances, they made the trade anyway and boom that's exactly what happened. They gambled and lost; they have to pay.
  - samatman 5y ago
    This version has the advantage that it respects the actual rules under which trading is done, rather than inventing a new set of rules which aren't used, as a vehicle of ressentiment.
  - daniel-cussen 5y ago
    Why do traders need to be insulated from their risk more than everyone else in society?
- labster 5y ago
  If the price of nickel goes up, nickel miners go out of business because they hedged their bets? I guess they were consenting adults who should have realized they could fold if their assets became too valuable? Because nickel is so expensive we just have to produce less of it, because they deserve punishment for gambling. Or we can just act like real consenting adults and agree that markets break every once in a while leading to outcomes that are bad for everyone. And thus we can reverse these outcomes. Even casinos have rules, and have reversed winnings or losses.
- unmole 5y ago
  In commodity markets it's usually the producers of commodities who hold short positions as hedges. If the price of Nickel skyrockets, their shorts will lose money but their inventory will also become more valuable. But due to the nature of the instrument, they need to come up with additional margin for mark to market losses. This isn't a question of solvency but of liquidity.If there's a short squeeze and the price gets completely disconnected from fundamentals, the producers and the brokers might go under and speculators who held long positions will make a massive profit. I don't see how that is more socially useful than the exchange stepping in to correct a market failure. The participants in commodity markets produce literal tangible goods, it's not a casino.
duped 5y ago
Which doesn't work out great when the short sellers are nickel producers hedging against drops in nickel prices.

Well, it's part of the game, isn't it? Or if I buy and expect it to go higher, they'll rollback and reimburse me if it falls?

lbarrow 5y ago
The exchange being able to roll back trades in extraordinary circumstances is also part of the game. The exchange obviously has a strong incentive not to abuse this power or the traders will find another exchange.
- djbebs 5y ago
  It really isn't, and the fact that this is the first time it has happened shows that its not.

daniel-cussen 5y ago

If your team loses the basketball game, the rest of your high school hates you. If you lose your job, you lose your health insurance. If you bet on the wrong part of the roulette wheel, you lose your chips. If you miss your rent, you get evicted. In all these endeavors, if you screw up you suck up the consequences, end of story. I feel literally no pity for traders who got margin called, they're forced to buy nickel to cover their short positions but they're just not worthy victims, they're debtors. And these are expensive people, these traders took out those loans to buy proof of their superiority, like cars, houses, jewelry for wives and affairs, investment-type goods like watches...maybe one of them was smart enough to buy Magic cards, but if they get short-squeezed, I doubt it. To my knowledge these traders are consenting adults, 18 and up surely, they gambled and won and took their money, this time they gambled and lost. They have to pay, with nothing but silence from them.

lbarrow 5y ago
That logic runs both ways, you could just as easily say: Well, the short squeeze traders knew the risks - they knew that LME had the legal authority to cancel trades in extraordinary circumstances, they made the trade anyway and boom that's exactly what happened. They gambled and lost; they have to pay.
- samatman 5y ago
  This version has the advantage that it respects the actual rules under which trading is done, rather than inventing a new set of rules which aren't used, as a vehicle of ressentiment.
- daniel-cussen 5y ago
  Why do traders need to be insulated from their risk more than everyone else in society?
labster 5y ago
If the price of nickel goes up, nickel miners go out of business because they hedged their bets? I guess they were consenting adults who should have realized they could fold if their assets became too valuable? Because nickel is so expensive we just have to produce less of it, because they deserve punishment for gambling. Or we can just act like real consenting adults and agree that markets break every once in a while leading to outcomes that are bad for everyone. And thus we can reverse these outcomes. Even casinos have rules, and have reversed winnings or losses.
unmole 5y ago
In commodity markets it's usually the producers of commodities who hold short positions as hedges. If the price of Nickel skyrockets, their shorts will lose money but their inventory will also become more valuable. But due to the nature of the instrument, they need to come up with additional margin for mark to market losses. This isn't a question of solvency but of liquidity.If there's a short squeeze and the price gets completely disconnected from fundamentals, the producers and the brokers might go under and speculators who held long positions will make a massive profit. I don't see how that is more socially useful than the exchange stepping in to correct a market failure. The participants in commodity markets produce literal tangible goods, it's not a casino.

duped 5y ago

Which doesn't work out great when the short sellers are nickel producers hedging against drops in nickel prices.