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Home / Mike Norman Economics / Negative Oil (Futures) Prices! — Brian Romanchuk

Negative Oil (Futures) Prices! — Brian Romanchuk

Summary:
When we think of a "squeeze" we usually assume "short squeeze." However, the collapse in WTF price is apparently due to a long squeeze. The main lesson to be taken away is for financial speculators. If you are incapable of taking delivery of a futures contract, you should be asking yourself exactly why you are trading the product. One of the standard trade strategies I saw in sell side research back in the day was hedging breakeven trades with oil futures. Although that looked cute, there was no way to deal with delivery, so I didn't pay much attention. Thanks to modern technology, it is possible to pretend that you are a hedge fund trading futures at home. However, just because a thing is possible, it does not mean that it is a good idea. Bond Economics Negative Oil (Futures)

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When we think of a "squeeze" we usually assume "short squeeze." However, the collapse in WTF price is apparently due to a long squeeze.
The main lesson to be taken away is for financial speculators. If you are incapable of taking delivery of a futures contract, you should be asking yourself exactly why you are trading the product. One of the standard trade strategies I saw in sell side research back in the day was hedging breakeven trades with oil futures. Although that looked cute, there was no way to deal with delivery, so I didn't pay much attention. Thanks to modern technology, it is possible to pretend that you are a hedge fund trading futures at home. However, just because a thing is possible, it does not mean that it is a good idea.
Bond Economics
Negative Oil (Futures) Prices!
Brian Romanchuk
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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