Front office -- prop vs market making vs sales/purchase. Mid-Office: risk vs compliance. Back office: IT vs controller.
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Hey ghstein, I swear if I had a silver banana for every lonely thread I posted too I'd be richer than @compbanker ...
You're welcome.
If anything, energy traders are killing it.
Based on?
Contangoes
Everyone always likes to look at a fwrd curve in contango and think they print money w/ the trade. Unfortunately, pulling it off is really really hard. Not helped at the moment that storage is ~filled, line fill ~done, and tanker rates for floating already are through the rough
Agreed. But the first people in should do ok I would think.
I don’t know if it’s the same as with grain but if it is than successfully pulling off a contango play is more ops dependent than anything. All it takes is a methed out 18 year old hitting the wrong button to fuck up a multi million dollar storage play
Not sure there are a lot of those at the big shops. And they better get it right at my shop because I'm counting on them.
Again I’m not sure it’s the same as with grain but I’d assume an oil major loading ships for storage would face a lot of the same execution risk. It’s not just traders and paper pushing ops guys that make a clean execution. It’s the guys physically loading ships/storage locations and maintaining the stored commodity. Even with insurance, if one of them fucks up your play is going to get really messed up really quick. Your cargo can go off grade, you can have excessive shrinkage, the storage recpetical can be damaged, or if you’re really lucky all three. So not only do you eat your insurance premium and deductible but you’ll be paying interest while you wait to get your insurance payout.
Good reply, hence why when I hear claims about people killing it, it really is a huge assumption which is not realised yet. There are so many variables at play to make the arb work.
Where are you coming up with this shit? Your attempts at using industry jargon betrays your ignorance. First off, the expression is off-spec. Secondly, what product is going to go off spec? I know of one product that has one spec that tends to go off in storage. Seriously, if you're going to answer in this thread and have kids reading it, answer the question because I have no clue wtf you're talking about.
Excessive shrinkage? Did you take one blending course, heard the word, and now think it sounds particular enough to give you an air of authority? How would this develop over time? Doesn't make any sense at all.
Storage "receptical" get damaged? This is the one I really need to hear.
Maybe you work in some all cash niche product but I have never heard of any of these issues. This is up there for one of the worst posts of all time among the many clueless commodity posts on this board.
I am DYING to know what your background is.
Killing it in paper trading.
Don't know much about the industry but doesn't that depend on whether they can actually offload their cargoes down the line for a higher spot price? What would happen if physical prices continue to plummet?
I’ve heard rumblings that there are some physical ethanol desks getting absolutely wrecked right now
can confirm. some plants have shut down
FMs being declared across iron ore and coal cargoes.
Shops with weak balance sheets will get wrecked. Who you cut first probably depends on where the fat was in the first place.
A shops liquidity (ie. cash management) will either make or break in the next 9 months.
This. Commodities are notoriously capital intensive and capital return poor. There's a reason why a whole bunch of banks left the business. Firms with poor funding / weak balance sheets are hurting as they cannot fund their positions forcing them to cut whether they like it or not. Just take a look at what Libor has done over the past month.
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