NEW ORLEANS - Farming has always been a risky business, at the mercy of bad weather, wars and drought. Now farmers' profits face a new and surprising enemy: speculators that some believe are driving prices up so fast that growers are getting locked out of top dollar for their crops. Shoppers are feeling it, too, as investors pump billions of dollars into agricultural commodities and, insiders say, help push up the price of the most basic of foodstuffs, a loaf of bread.
Market prices for options are rigidly structured by computer models. An option trader may have opinions on the proper buying or selling price, but ultimately the price will be placed close to an option price curve that is the result of time-tested mathematical formulas based on the probabilities of future price variations. The pricing of all options is related to the probability of underlying prices at expiration falling between the estimated upper and lower breakeven points. Although puts and calls are derivatives based on futures and equities, upper and lower breakeven prices computed for options should be useful to traders in the underlying assets as well as those in the options market. By assessing future probabilities of price changes for futures contracts and stocks, the options m...
NEW YORK, Jan. 27, 2011 /PRNewswire/ -- Standard & Poor's, the world's leading index provider, announced today the launch of the S&P GSCI Dynamic Roll Index. The S&P GSCI Dynamic Roll Index is an enhanced version of the S&P GSCI, one of the industry's most closely watched commodities indices, that is designed for investors seeking long only exposure to the commodity market but with the desire to reduce the potential negative impact of contango on roll returns. Standard & Poor's also announced that it has licensed the S&P GSCI Dynamic Roll Index to BNP Paribus to serve as the basis for BNP Paribus investment products based upon the Index. Contango describes a situation in the futures market where prices for future delivery are higher than prices for immediate (or nearer) delivery. The te...
WASHINGTON (Reuters) - Senators hoping to rein in high oil and gasoline prices slammed the futures market regulator on Thursday [May 26] for not moving faster to crack down on out-of-control speculators in commodity markets. At a meeting with lawmakers on Capitol Hill, Commodity Futures Trading Commission Chairman Gary Gensler refused to spell out when the agency would act on a rule to limit the number of contracts big market players can hold in oil and other commodities.
Prices of December futures for corn, wheat and oats reached the peak of a four-month rising trend in early June 2009. What followed was a difficult summer for all grains including the bean complex -- soybeans, meal and oil. Causes for price decline's included a combination of increased planting, good weather conditions and lower demand for grains. The option market cannot predict what will happen to grain futures prices, but it can and does predict the likely range in futures prices over the time to expiration. Option price curves for calls on December 2009 corn, wheat and oats are combined on "Grain call options." "Predicted price spreads" shows the upper and lower breakeven prices computed by the LLP option model for corn, wheat, oats, soybean meal and soybean oil. At breakeven, the o...
PRESIDENT Obama has a choice as the 2012 campaign looms. He can side with Wall Street manipulators who write big checks or he can protect ordinary consumers who vote. The president is courting the fat cats at the same time the public is learning more about the unfettered betting on oil prices. Almost 90 percent of the futures market is rank speculation by noncommercial traders, not buyers hedging against the vagaries of supply and demand.
FORT LEE, N.J., Dec. 14, 2010 /PRNewswire/ -- The National Inflation Association - http://inflation.us - today released the following article to its members: There were reports out today that JP Morgan has now admitted to having their massive naked short position in silver and is taking steps to reduce it. According to the Financial Times in London, "JPMorgan has quietly reduced a large position in the US silver futures market which had been at the centre of a controversy about its impact on global prices for the precious metal." According to a person familiar with the matter, "The decision by JPMorgan was an attempt to deflect public criticism of the bank's dealings in silver." JP Morgan said in a statement, "It is absolutely incorrect to say or imply that the Nymex, CFTC or any other ...
Futures contracts that are relatively trendless invite trades that generate profits from movement in volatility instead of price. Delta-neutral spreads fit this need because typically, at least initially, the assets in the trade offset each other in terms of price changes relative to price movements in the underlying asset. Delta-neutral trades are similar to short option strangles in which a put and call are sold short near the breakeven strike prices. Both trades force the futures market price to move toward breakeven before the trade incurs a loss, and both have unlimited losses beyond the breakeven prices. Higher total premiums from the options sold occur with the delta-neutral trade because the calls are sold at the market.
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