Gambling with the futures | SocialistWorker.org - 0 views
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HISTORICALLY, FUTURES contracts were traded primarily between producers of commodities and consumers of commodities at large, regulated commodities exchanges. Most futures contracts eventually resulted in the actual delivery of a commodity on a set date. That's all changed in recent years. Now, the bulk of firms trading on futures exchanges are speculators with no intention of ever receiving delivery of the commodities they are trading.
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All other things being equal, the prices of expiring futures contracts should converge with the pricing on spot markets on the date of expiration--that is, the price of oil in June should be pretty close to the price of oil futures contracts trading today that expire in June. But there are huge divergences developing. Why? Because there are too many investors chasing too few futures contracts, and this is creating demand for the underlying commodity that drives up the price of the commodity to be delivered in the future.
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HISTORICALLY, FUTURES contracts were traded primarily between producers of commodities and consumers of commodities at large, regulated commodities exchanges. Most futures contracts eventually resulted in the actual delivery of a commodity on a set date. That's all changed in recent years. Now, the bulk of firms trading on futures exchanges are speculators with no intention of ever receiving delivery of the commodities they are trading.
