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London traders hit $500M jackpot when oil went negative

bloomberg.com

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Re: London traders hit $500M jackpot when oil went negative

#91

Post by LatteLazy »

anonu wrote: post #44

The crux of this trade was the TAS order type. It seems like these guys arbed the liquidity difference beyond their wildest dreams... But now they're probably spooked about it because it sounds borderline manipulation. Order types are constantly getting traders or exchanges in trouble. If you know about the less popular ones you always stand to beat out your competitors who dont. TAS reminds me of D-quotes on NYSE.

You're not wrong that Order Type choices are complex and venues need to be careful what they allow. But at the same time, if you're a trader, you really should know all the order types a venue supports and what they let traders do. There are not that many of them. I did trade support from the IT side for a few years and I knew all the orders and which venues would accept which types and that was in European equities...

Re: London traders hit $500M jackpot when oil went negative

#92

Post by fauigerzigerk »

truckerbill wrote: post #89
sgt101 wrote: post #83

Earlier quoted context omitted.

How so?

Any news of gains like this raises optimism about oil prices, more people will be inclined to invest. More generally, engaging in the market is being complicit with it. Worth noting we’re all complicit, but trading is more voluntary.

No, I don't believe that. If anything, oil prices becoming extremely volatile hurts the oil & gas sector. It makes investment in real production capacity less attractive, more risky and more difficult to finance.

The gains you're talking about are tiny compared to the massive write-downs at oil companies.

Re: London traders hit $500M jackpot when oil went negative

#93

Post by erikpukinskis »

AmericanChopper wrote: post #81
wonderwonder wrote: post #74

Earlier quoted context omitted.

This would essentially mean that most winners on every trade in equities, crypto, forex (except for central banks I guess) etc. are committing theft. When individuals enter a trade on these markets its soley to make a profit, very rarely is it to take physical delivery of a good that will be used. You make a trade based on your assumption of which way the price of that asset will go. Someone else makes an equal and o…

There is a non-trivial number of people who believe the very concept of private property is theft. Quite a few of them post comments on HN.

I think you have it a bit confused. We think property is violence not theft.

Re: London traders hit $500M jackpot when oil went negative

#94

Post by fauigerzigerk »

londons_explore wrote: post #90
sgt101 wrote: post #83

Earlier quoted context omitted.

How so?

Because someone owning an oil fired power plant can buy all these negative priced oil futures, take actual delivery, and burn the oil to produce electricity and get paid for that. Normally, burning oil to make electricity is uneconomic, since gas, coal, and even renewables are cheaper. Oil fired plants were sitting mostly mothballed for the last decade in most of the world, for use only in emergencies.

But they don't have the storage capacity, otherwise prices would never have gone below zero.

Re: London traders hit $500M jackpot when oil went negative

#95

Post by randomcarbloke »

throwaway1777 wrote: post #13
Ecco wrote: post #7

I really wonder if those guys really created $500M worth of “value” for the rest of the world. Because if they didn’t, it means it’s theft...

Derivative trading is usually zero sum. There is a loser for every winner. I don’t understand in what world buying and selling oil on an open market could be considered theft. Everyone knows the rules of the game.

it is possible for two of the three parties to realise a profit at the strike, and the third to ultimately profit from holding the security.

it does follow that a and then b could have made more profit by not lending or selling, but it is far from zero-sum.

Re: London traders hit $500M jackpot when oil went negative

#96

Post by asa4akj »

silasdavis wrote: post #88
javert wrote: post #26

Earlier quoted context omitted.

Let's take an example. If I buy a stock at $20 from Arthur and sell it the next day for $60 to Bob, have I made $40 of value? Yes. Without people like me, Arthur might have gotten a much worse deal (possibly $0). Again, without people like me, Bob might have gotten a much worse deal (possibly $100, or maybe he wouldn't be able to buy at any price). That's the service that active traders provide to everyone else in th…

I am fine with your tautology: > It's not for you to judge whether the $40 is "worth" $40. It is. What other sensible quantative way of defining value is there? The question is do we think the position leveraged to extract that value is fair. You seem to think that price manipulation (presumably of some explicitly prohibited forms) can be unfair. So I assume you amenable to some extrinsic definition of fair play. In…

but you are just adding possible unfair/unethical things that might have happen. What about good things? The 1st seller was aware there was a big chance for the stock to grow, but was in need of liquidity for other ventures or needs. And the second buyer, know that it was bought much cheaply, but he is bullish on that stock. If the trade happened that means it was the best possible trade on those moments, but there will always be external factors because we are all humans, we all have different reasons, different needs and different experience and knowledge.

Re: London traders hit $500M jackpot when oil went negative

#97

Post by AmericanChopper »

erikpukinskis wrote: post #93
AmericanChopper wrote: post #81

Earlier quoted context omitted.

There is a non-trivial number of people who believe the very concept of private property is theft. Quite a few of them post comments on HN.

I think you have it a bit confused. We think property is violence not theft.

I believed the idea was originally popularised by the slogan “La propriété, c'est le vol”, where vol does translate to theft. But violence would certainly be quite similar to Proudhon‘s original meaning for the phrase.

Marx didn’t like the idea because he said it presupposes that property exists, which he obviously had a problem with. Fun fact, this disagreement was the primary conflict that split the IWA into seperate anarchist and Marxist movements. With the anarchists later going on to adopt national socialism, which at the time was known as fascism.

Re: London traders hit $500M jackpot when oil went negative

#98

Post by truckerbill »

fauigerzigerk wrote: post #92
truckerbill wrote: post #89

Earlier quoted context omitted.

Any news of gains like this raises optimism about oil prices, more people will be inclined to invest. More generally, engaging in the market is being complicit with it. Worth noting we’re all complicit, but trading is more voluntary.

No, I don't believe that. If anything, oil prices becoming extremely volatile hurts the oil & gas sector. It makes investment in real production capacity less attractive, more risky and more difficult to finance. The gains you're talking about are tiny compared to the massive write-downs at oil companies.

I agree with you there, overall the situation isn't completely bad news. The only thing better than volatile is a fully downward trend however. I guess I'm just arguing that we owe ourselves a bit of moral decisionmaking rather than just continuing to believe in the providence of the Invisible Hand. These guys weren't doing this for the sake of the environment.

Re: London traders hit $500M jackpot when oil went negative

#99

Post by Traster »

londons_explore wrote: post #90
sgt101 wrote: post #83

Earlier quoted context omitted.

How so?

Because someone owning an oil fired power plant can buy all these negative priced oil futures, take actual delivery, and burn the oil to produce electricity and get paid for that. Normally, burning oil to make electricity is uneconomic, since gas, coal, and even renewables are cheaper. Oil fired plants were sitting mostly mothballed for the last decade in most of the world, for use only in emergencies.

It's true that low oil prices will encourage oil fired plants to open back up,but I'm not sure that a very short term drop is going to have much effect since spinning up and down a power plant isn't exactly a short term decision.

Re: London traders hit $500M jackpot when oil went negative

#100

Post by Traster »

jb775 wrote: post #61

> There are also rules that forbid trading with the goal of deliberately affecting the settlement [price] > Vega’s jackpot involved about a dozen traders aggressively selling oil in unison before the May West Texas Intermediate contract settled at 2:30 p.m. I think it's safe to say the traders deliberately affected the settlement price. Granted they took on a lot of risk, it was still deliberate. Now the question is…

The funny thing about these stories is that it probably can be proven, and the reason for that is that there's quite likely a text or an e-mail from some cocky idiot saying "We could make a tonne if we push the price down" or "Man I can't beleive we managed to push the price to -37, we're going to make a killing".
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