I was a bit sceptical at your RJO mate's speculation that mom-n-pops were left holding the bag on some of the long May CL trades that imploded yesterday. As you suggested above, I assumed these were mostly physical market participants that had to deal with the realities of May contracts converging to spot as we approached expiry with storage full. I thought this because surely no brokerage firm would be stupid enough to let retail speculator hold position going into expiration week - regardless of the Exchange's decision. Mine for example forces the contract role the week prior or liquidates the position as it does not allow physical settlement. Alas, turns out Interactive Brokers was left holding the bag to tune of $90MM. Estimate is that other retail brokers may be stuck with 500MM losses. What were they thinking?!
I saw that too! That’s a big number that IB got tagged with. I still think it’s a prop group or some other pseudo-sophisticated group, but alex was probably more correct than I thought.
Great story, thanks. Any thought on Lean hogs futures? Looks like supply is becoming tight, US factory are shutting down due to covid19 outbreaks, China is squeezed by the African swine fever. Some headwinds with trade tariff but Trump might give it a temporary break. Also, as school reopen, this might ramp up demand. Cheers - FS
"The CME might have just killed all physical commodity ETFs." You think that was designed on purpose? Go back to more participants trading more futures instead of being at the mercy of a few large ETFs?
Yeah, maybe, but I think that less people will trade commodities. Many people won't open a futures account but anyone with a Robinhood account can trade USO. :)
Sorry, I need clarification. I read it saying the installment receipts were an obligation?
So, was the LLC buying the obligation for a dollar credit? Lowering his obligation to $6.50?
If it was an obligation and the firm went bankrupt didn't he have $6.50 of downside? Was this an arb between legal jurisdictions? The LLC just refused to honor the contractual obligation?
If the firm wanted the LLC pay, didn't the the LLC's right to collect the stock disappear? i.e. The contract expired worthless?
great story. Kevin this is something you know I have always thought of as a possibility the Saudi’s depegging. What happens if DT turns away their oil tankers headed our way and/ or bails out the frackers. Read a couple of ME papers and like the general press the current oil situation is temporary. I would agree but like the clowns in Washington how long will it take to resolve the issue. I don’t have any expertise in oil/gas but from what I have read low oil prices are here too stay. So I am MBS and feeling the heat, what options do I have. Issue more debt or depegging and blame the western infidels . Long shot but SA is going to have to eventually have depeg if the $ maintains its strength and you continued depressed oil prices. Read an article SA debt/ GDP is expected to rise from 30 to 50% this year
I was a bit sceptical at your RJO mate's speculation that mom-n-pops were left holding the bag on some of the long May CL trades that imploded yesterday. As you suggested above, I assumed these were mostly physical market participants that had to deal with the realities of May contracts converging to spot as we approached expiry with storage full. I thought this because surely no brokerage firm would be stupid enough to let retail speculator hold position going into expiration week - regardless of the Exchange's decision. Mine for example forces the contract role the week prior or liquidates the position as it does not allow physical settlement. Alas, turns out Interactive Brokers was left holding the bag to tune of $90MM. Estimate is that other retail brokers may be stuck with 500MM losses. What were they thinking?!
I saw that too! That’s a big number that IB got tagged with. I still think it’s a prop group or some other pseudo-sophisticated group, but alex was probably more correct than I thought.
Man I so jealous of you older guys. The chaos and the rush of being on the pit floor I can only imagine and watch it on movies.
What about the introverts? There's no way I would survive in that environment haha
don't worry Ian harris, i believe drugs were legal back then , ask jimmy he knows it lol
Great story Kev!
Great story Kevin. Even the DruckMeister would be proud of that trade.
Tellingly, this lyric just popped into my head (h/t Mick n’ Keef):
‘Pleased to meet you
Hope you guess my name
'Cause what's confusing you is just the
Nature of my game...’
That's one of my favourite tunes to play on guitar. It's super simple musically, but just fantastic.
I don't know why, but I have always loved this verse:
I watched with glee while your kings and queens
Fought for ten decades, for the gods they made
I shouted out "who killed the Kennedys?"
When after all
It was you and me
Amazing
Hi Kevin,
Great story, thanks. Any thought on Lean hogs futures? Looks like supply is becoming tight, US factory are shutting down due to covid19 outbreaks, China is squeezed by the African swine fever. Some headwinds with trade tariff but Trump might give it a temporary break. Also, as school reopen, this might ramp up demand. Cheers - FS
Hi Flower Smuggler,
I have not looked into lean hogs at all. I am putting it on my list of things to watch.
Thanks for the heads up!
https://www.meed.com/rethinking-dollar-peg/ Old article but the logic for depegging. I am counting on MBS’s ego.
counting on MBS’s ego
"The CME might have just killed all physical commodity ETFs." You think that was designed on purpose? Go back to more participants trading more futures instead of being at the mercy of a few large ETFs?
Yeah, maybe, but I think that less people will trade commodities. Many people won't open a futures account but anyone with a Robinhood account can trade USO. :)
Fantastic story, thank you for sharing. Without getting into the details, do you know/can you share what he is doing now?
Thanks TP. He went on to be one of Canada's most successful hedge fund managers.
Did you Work at the Merc? Eurodollar Pit?
Hey Motown.
I met Alex through the internet and had him on our Market Huddle podcast, so that' how I know him.
But I did work for the briefest of time in the D-mark pit. But that was ages ago.
D-Mark. Yes, Pre Euro. I started at the CBOT part time 1982.
Sorry, I need clarification. I read it saying the installment receipts were an obligation?
So, was the LLC buying the obligation for a dollar credit? Lowering his obligation to $6.50?
If it was an obligation and the firm went bankrupt didn't he have $6.50 of downside? Was this an arb between legal jurisdictions? The LLC just refused to honor the contractual obligation?
If the firm wanted the LLC pay, didn't the the LLC's right to collect the stock disappear? i.e. The contract expired worthless?
great story. Kevin this is something you know I have always thought of as a possibility the Saudi’s depegging. What happens if DT turns away their oil tankers headed our way and/ or bails out the frackers. Read a couple of ME papers and like the general press the current oil situation is temporary. I would agree but like the clowns in Washington how long will it take to resolve the issue. I don’t have any expertise in oil/gas but from what I have read low oil prices are here too stay. So I am MBS and feeling the heat, what options do I have. Issue more debt or depegging and blame the western infidels . Long shot but SA is going to have to eventually have depeg if the $ maintains its strength and you continued depressed oil prices. Read an article SA debt/ GDP is expected to rise from 30 to 50% this year
It's definitely ugly out there for all oil producers - including your northern friends. :)
I worry that desperate times make desperate people do desperate things.