is it really worth it? - Commodities Futures Trading | futures io social day trading
futures io futures trading


is it really worth it?
Updated: Views / Replies:14,872 / 99
Created: by Silvester17 Attachments:3

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 3  
 
Thread Tools Search this Thread
 

is it really worth it?

  #31 (permalink)
Fortitudo et Honor
Austin, TX
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: Futures
 
Posts: 882 since Mar 2011
Thanks: 128 given, 703 received


sysot1t View Post
you are thinking of hedgers ... they(and their companies) are willing to pay the price of oil because they need to ensure their operating costs (for their business) remain as constant as possible.. so they will go out and buy all the contracts they can and lock in todays price if they are forecasting higher prices down the road based on market and fundamental values... at the time of exercise or delivery if the price is lower, they lost (but that was already taken into account within their operations) if the price was higher, their operations continue without interruption..

speculators (no matter on what commodity) are traders who trade to profit from information they have about where future prices are heading. True speculators are well informed (regardless of how they get that info, lawful or not) and act on information based on intrinsic values, and that is what allows them to at times predict future prices better than any other traders.

In the short term btw, speculators dont necessarily always win, given market value might be in disconnect from fundamentals in the short term, but long term they do tend to win quite often.

I think that's exactly what I said. Whether it's an airline trying to lock in at a lower cost (to reduce operating costs) or the speculator who's trying to make a $, both aren't buying based on the current physical reality, both are buying based on sentiment and anticipation and both are "speculating" that the price will increase. Whether it actually does or not, remains to be seen. That's why it's called speculation.

My point was the although both the business owner/consumer and speculator are both buying and selling based on forecasts and analysis and speculation, it's the "speculator" that gets a bad reputation or seen as evil/no honor.

If you alter a purchase/sale decision at all based on anticipation, you are in essence, speculating. The person that buys a home NOW (instead of continuing to shop) because they're speculating that the market has reach bottom (and prices will increase) is speculating. There's no way to know. Very few people who operate a business or make large purchases do so strictly on a current basis.

There's only a certain percentage of currency transactions(vacationers and travelers) who actually exchange currency based on immediate/current needs. Banks, businesses, companies all make currency transactions based upon some sort of analysis....which is called speculation...

Reply With Quote
 
  #32 (permalink)
Membership Permanently Revoked
 
Futures Experience: Intermediate
 
Posts: 1,176 since Nov 2009
Thanks: 221 given, 844 received

nope, you are still placing two completely different things under the same umbrella.... speculating is all about profiting from information... a business hedges to smooth operating costs arising from their raw materials and business processes that might depend on a given variable(currencies, oil, natgas, grains, milk, metals, etc) ... their primary goal is not speculating as to the direction of the raw material, but to ensure stable prices...

and speculators are only getting a bad rap because congress/senate needs a escape goat to point the finger to when it comes to inflation and rising costs... never mind that they flooded the markets with currency and that they esentially subsidized the banking/financial sectors with taxpayers funds...


RM99 View Post
I think that's exactly what I said. Whether it's an airline trying to lock in at a lower cost (to reduce operating costs) or the speculator who's trying to make a $, both aren't buying based on the current physical reality, both are buying based on sentiment and anticipation and both are "speculating" that the price will increase. Whether it actually does or not, remains to be seen. That's why it's called speculation.

My point was the although both the business owner/consumer and speculator are both buying and selling based on forecasts and analysis and speculation, it's the "speculator" that gets a bad reputation or seen as evil/no honor.

If you alter a purchase/sale decision at all based on anticipation, you are in essence, speculating. The person that buys a home NOW (instead of continuing to shop) because they're speculating that the market has reach bottom (and prices will increase) is speculating. There's no way to know. Very few people who operate a business or make large purchases do so strictly on a current basis.

There's only a certain percentage of currency transactions(vacationers and travelers) who actually exchange currency based on immediate/current needs. Banks, businesses, companies all make currency transactions based upon some sort of analysis....which is called speculation...


Reply With Quote
 
  #33 (permalink)
Market Wizard
Columbus, OH
 
Futures Experience: None
Platform: NT 8, TOS
Favorite Futures: ES
 
Silvester17's Avatar
 
Posts: 3,332 since Aug 2009
Thanks: 4,579 given, 10,313 received



RM99 View Post
I think that's exactly what I said. Whether it's an airline trying to lock in at a lower cost (to reduce operating costs) or the speculator who's trying to make a $, both aren't buying based on the current physical reality, both are buying based on sentiment and anticipation and both are "speculating" that the price will increase. Whether it actually does or not, remains to be seen. That's why it's called speculation.

My point was the although both the business owner/consumer and speculator are both buying and selling based on forecasts and analysis and speculation, it's the "speculator" that gets a bad reputation or seen as evil/no honor.

If you alter a purchase/sale decision at all based on anticipation, you are in essence, speculating. The person that buys a home NOW (instead of continuing to shop) because they're speculating that the market has reach bottom (and prices will increase) is speculating. There's no way to know. Very few people who operate a business or make large purchases do so strictly on a current basis.

There's only a certain percentage of currency transactions(vacationers and travelers) who actually exchange currency based on immediate/current needs. Banks, businesses, companies all make currency transactions based upon some sort of analysis....which is called speculation...

yep. I think you got that pretty much wrong. you see the whole point of hedging is to avoid speculation. you buy or sell a future to lock in today's price.

maybe you'll better understand reading this: Hedge (finance) - Wikipedia, the free encyclopedia

Reply With Quote
 
  #34 (permalink)
Fortitudo et Honor
Austin, TX
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: Futures
 
Posts: 882 since Mar 2011
Thanks: 128 given, 703 received


Silvester17 View Post
yep. I think you got that pretty much wrong. you see the whole point of hedging is to avoid speculation. you buy or sell a future to lock in today's price.

maybe you'll better understand reading this: Hedge (finance) - Wikipedia, the free encyclopedia

Buying now because you think prices will increase is not hedging, it's speculating.

Buying an option in both directions (where you can lose a little bit of money on the cancelled option, but save a lot on the purchased option) is hedging. "Hedge your bet" and the term hedge refers to strategies trying to limit your risk if your theory is wrong. In a sense, you could call speculation hedging, but in it's purest form, hedging requires you to take an opposite position in either another market or vehicle, thus locking in your risk, if one loses, the other wins and offsets. Buying roofing materials now because you think prices will increase is only a hedge if you're able to sell "future" roofing contracts immediately to use them, otherwise if the price stays current, you lost the money for tied up capital, storage, etc if you can't use them.

BOTH are speculative. you need to look up the term speculation or speculative in the dictionary (not investopedia). In it's purest sense speculation is supposition about the future or unknown/unverifiable events.

1. a. Contemplation or consideration of a subject; meditation.
b. A conclusion, opinion, or theory reached by conjecture.
c. Reasoning based on inconclusive evidence; conjecture or supposition.

2. a. Engagement in risky business transactions on the chance of quick or considerable profit.
b. A commercial or financial transaction involving speculation.

Anyone who makes a business decision based upon anticipation is "speculating."

It's making a decision or statement without facts.

So when an airline sees what's going on in Lybia/Egypt and some smarty types think that the price of oil is likely to go up, they "speculate" and purchase more oil than they need now....anticipating future costs...which adds upward pressure to the market. It's a different motivation (trying to save a $ instead of make of the resale) but the effects upon the market are the same....more contract orders and upward pressure on price.

Reply With Quote
 
  #35 (permalink)
Market Wizard
Columbus, OH
 
Futures Experience: None
Platform: NT 8, TOS
Favorite Futures: ES
 
Silvester17's Avatar
 
Posts: 3,332 since Aug 2009
Thanks: 4,579 given, 10,313 received


RM99 View Post
Buying now because you think prices will increase is not hedging, it's speculating.

YES. now that's correct.

but what I was saying is: buying (or selling) now because you don't want to speculate what prices will do is hedging. hope that helps.

Reply With Quote
 
  #36 (permalink)
Fortitudo et Honor
Austin, TX
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: Futures
 
Posts: 882 since Mar 2011
Thanks: 128 given, 703 received


Silvester17 View Post
YES. now that's correct.

but what I was saying is: buying (or selling) now because you don't want to speculate what prices will do is hedging. hope that helps.

We're def talking semantics, but here's why I think we're talking apples/oranges. We both agree on what a "typical" sense of a speculator is.

I agree with you that buying or locking in with a futures contract is hedging, but I'm not talking about that, I'm talking about the airline that decides...."hey, if we buy at $100, NOW (or the nearest future contract), and the price goes up, we'll come out ahead....all we have to do is rent or build storage capacity to keep it till then." Although they're not buying it with the intent on making a $, they're buying it (immediate) with the intent on saving a $ or reducing future anticipated operating costs.

A true "hedge" in oil would involve buying 1 contract of WTI and shorting 1 contract of Brent. That way, if oil goes up, you sell the WTI at a profit, pay the loss on the Brent and you're only out the fees/commissions (and any spread changes between the two). If the price goes down, you flip the scenario. It's very similar to an option hedge strategy.

The real cost/risk to a true hedger is if the price does nothing, cause you're still out the fees (or vig in sports betting).

An example in sports betting is to bet a 2 game parlay where you have a fairly good idea about the first game...if/when you win the first game, you can then "hedge" your bet to your liking by betting in the opposite direction on the second game...that way, if you win, you at least win some money and if you lose, you only end up losing the vig.

In order to be a true "hedge" there needs to be an opposite transaction in a competiting manner which ensures that no matter what outcome, your pain in minimized.

Even buying/locking in futures prices now is speculative, cause if the price goes down, you're out both the loss in value AND tying up the capital(interest/opportunity cost) till the expiration/delivery.

Reply With Quote
 
  #37 (permalink)
Market Wizard
Columbus, OH
 
Futures Experience: None
Platform: NT 8, TOS
Favorite Futures: ES
 
Silvester17's Avatar
 
Posts: 3,332 since Aug 2009
Thanks: 4,579 given, 10,313 received


RM99 View Post
We're def talking semantics, but here's why I think we're talking apples/oranges. We both agree on what a "typical" sense of a speculator is.

I agree with you that buying or locking in with a futures contract is hedging, but I'm not talking about that, I'm talking about the airline that decides...."hey, if we buy at $100, NOW (or the nearest future contract), and the price goes up, we'll come out ahead....all we have to do is rent or build storage capacity to keep it till then." Although they're not buying it with the intent on making a $, they're buying it (immediate) with the intent on saving a $ or reducing future anticipated operating costs.

A true "hedge" in oil would involve buying 1 contract of WTI and shorting 1 contract of Brent. That way, if oil goes up, you sell the WTI at a profit, pay the loss on the Brent and you're only out the fees/commissions (and any spread changes between the two). If the price goes down, you flip the scenario. It's very similar to an option hedge strategy.

The real cost/risk to a true hedger is if the price does nothing, cause you're still out the fees (or vig in sports betting).

An example in sports betting is to bet a 2 game parlay where you have a fairly good idea about the first game...if/when you win the first game, you can then "hedge" your bet to your liking by betting in the opposite direction on the second game...that way, if you win, you at least win some money and if you lose, you only end up losing the vig.

In order to be a true "hedge" there needs to be an opposite transaction in a competiting manner which ensures that no matter what outcome, your pain in minimized.

Even buying/locking in futures prices now is speculative, cause if the price goes down, you're out both the loss in value AND tying up the capital(interest/opportunity cost) till the expiration/delivery.

OK. now we're getting somewhere. guess I'm a little slow. but I like apples and oranges both.

and thanks for your detailed posts.

Reply With Quote
 
  #38 (permalink)
Membership Permanently Revoked
 
Futures Experience: Intermediate
 
Posts: 1,176 since Nov 2009
Thanks: 221 given, 844 received


RM99 View Post
So when an airline sees what's going on in Lybia/Egypt and some smarty types think that the price of oil is likely to go up, they "speculate" and purchase more oil than they need now....anticipating future costs...which adds upward pressure to the market. It's a different motivation (trying to save a $ instead of make of the resale) but the effects upon the market are the same....more contract orders and upward pressure on price.

I guess we are looking at different dictionaries, so let's just leave it at that..

as to the Middle East and Airlines..

Lybia's Oil production was down by 75% over over 1MM bbl/d ... before the US "intervened" ... they used to represent about 5% of total OPEC Exporting production... if the unrest spreads to Iran (15% or 4MM bbl/d) the remainder OPEC members wont be able to quickly enough ramp up production to supplement the 5MM+ bbl/d that would be impacted...

The US alone consumes close to 20MM bbl/d... with China and Japan following closely... so you have the worlds largest economies depending on that production to meets the needs of their respective populations and that of the rest of the world that consume their products...

we all know OPEC is only a component of overall world oil production, but OPEC members are the largest exporters of oil; but lets assume that Russia/Norway/Canada/Mexico can maintain demand... there will still be an issue with ramping up...

now, I dont know how much you know about crude but Jet Fuel is not the only resulting product of the combination of one of the petroleum distillates that is used in our economy.. you have so many different things that are interwined on our industries that depend on crude that it is embedded on pretty much everything around us..

as a result any business using crude distillates byproducts will hedge their raw materials... not speculate... and offset the risk to their business operations as soon as there is the possibility of any impact to the fundamentals on the crude oil market... simple supply and demand... fundamental change: decrease in supply, translates to higher prices as the demand has not changed..

USA might intervene and open their reserves, but that is only a short term measure to offer relief to actually prevent speculators from profiting too much from a fundamental change.

anyhow, just my opinion.. I dont track crude.. but I do pay attention to it as it impacts all markets.

Reply With Quote
 
  #39 (permalink)
Fortitudo et Honor
Austin, TX
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: Futures
 
Posts: 882 since Mar 2011
Thanks: 128 given, 703 received


sysot1t View Post
I guess we are looking at different dictionaries, so let's just leave it at that..

as to the Middle East and Airlines..

Lybia's Oil production was down by 75% over over 1MM bbl/d ... before the US "intervened" ... they used to represent about 5% of total OPEC Exporting production... if the unrest spreads to Iran (15% or 4MM bbl/d) the remainder OPEC members wont be able to quickly enough ramp up production to supplement the 5MM+ bbl/d that would be impacted...

The US alone consumes close to 20MM bbl/d... with China and Japan following closely... so you have the worlds largest economies depending on that production to meets the needs of their respective populations and that of the rest of the world that consume their products...

we all know OPEC is only a component of overall world oil production, but OPEC members are the largest exporters of oil; but lets assume that Russia/Norway/Canada/Mexico can maintain demand... there will still be an issue with ramping up...

now, I dont know how much you know about crude but Jet Fuel is not the only resulting product of the combination of one of the petroleum distillates that is used in our economy.. you have so many different things that are interwined on our industries that depend on crude that it is embedded on pretty much everything around us..

as a result any business using crude distillates byproducts will hedge their raw materials... not speculate... and offset the risk to their business operations as soon as there is the possibility of any impact to the fundamentals on the crude oil market... simple supply and demand... fundamental change: decrease in supply, translates to higher prices as the demand has not changed..

USA might intervene and open their reserves, but that is only a short term measure to offer relief to actually prevent speculators from profiting too much from a fundamental change.

anyhow, just my opinion.. I dont track crude.. but I do pay attention to it as it impacts all markets.

Again, I see buying at a price now because you're anticipating a price increase as speculation, regardless of your motives.

I see selling an equal amount of BZ for every CL you buy as a true "hedge" thereby locking in the price and hedging your risk regardless of whether it goes up or down. THAT is a true hedge. The real risk to a true hedge is if it does nothing at all (i.e. you lost money trying to eliminate risk that wasn't there).

Reply With Quote
 
  #40 (permalink)
Membership Permanently Revoked
 
Futures Experience: Intermediate
 
Posts: 1,176 since Nov 2009
Thanks: 221 given, 844 received



RM99 View Post
In order to be a true "hedge" there needs to be an opposite transaction in a competiting manner which ensures that no matter what outcome, your pain in minimized.

you assume there has to be a transaction on both sides... but what if you are hedging against your current inventory...

you have storage for X @ $100 lets say... and you need $105 before your profit margin start suffering and you have to raise prices... crude is at $103.... so you hedge your current costs from going higher locking your price at $105 let say...

pick another example..

Coke, they hedge their raw materials for their cans... it is all based on what inventory they have and what produdction requirements they have, as well as what fundamental changes they are foreseeing within the market.

as to the WTI/BRN... isnt that an inter-exchange spread? I started trading spreads lately, and I am focusing mainly on index spreads while I learn more about them... so take the last comment with a grain of salt..


Last edited by sysot1t; March 22nd, 2011 at 01:14 AM.
Reply With Quote

Reply



futures io > > > > is it really worth it?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Cory's VolumeStopV3 (and now V4) - Worth A Look! HJay NinjaTrader 439 Yesterday 11:33 AM
CFDs - not worth trading? Twiddle The Elite Circle 22 August 25th, 2011 10:21 AM
"ease" of Easy Language isn't worth the limitations RM99 TradeStation 5 July 9th, 2011 01:58 AM
Looking for several years worth of reliable and free Forex tick data? Here you go. Trankuility The Elite Circle 13 March 19th, 2011 11:45 PM
Is an Ivy League Diploma Still Worth the Price of Admission? Quick Summary News and Current Events 0 March 2nd, 2011 07:30 PM


All times are GMT -4. The time now is 03:33 AM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-16 in 0.19 seconds with 20 queries on phoenix via your IP 54.196.201.241