Pops
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Investing General Discussion
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Pops
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CME says oil futures can trade negative as May prices hit $5.50/barrel
Open interest is still 108,000 contracts The CME says oil futures can trade in negative territory. We're not too far away now with the May contract hitting $5.
Blazin
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made a chart for you guys to explore investor psychology I have talked about. This is a chart of 1929 don't worry about how times are different, the Fed, the Virus etc. Humans respond emotionally the same. This is a daily chart, so you can see during the decline month they likely felt very similar to how we felt in March. Rapid drop, brutal self off days, large rallies that fail. Then the dust settles and there is a large reflex rally off the low. Again step into the mind set as you look at that rally. Investors who sold at the bottom would feel like fools, asking themselves if they made a mistake. Investors who didn't panic are being rewarded. Investors who keep buying the rally continue to be rewarded.
The market then reaches resistance at the 200 day moving average and a very different decline begins that would go on for the next two years and would see the market lose 86% off that relief rally. My point of this is not to scare people, but to try to understand how investor emotions play into these cycles. Every market event will march to it's own drum but there are consistent human behaviors throughout. We are in an time period where being patient, not marrying a side, and staying flexible are the right choice.
I don't believe this is 1929 and I'm confident that most here are young enough to weather the storm if any. (ie I'm not against buy and hold) Now when we are in the mid 2030s and something happens like this, we may need to take a break from banging our cyber maids and pay attention since weathering a brutal bear market at that age may hurt more than it helps. Many are hitting their peak earnings range, even if you are bullish long term you should cheer a bear market as they are great opportunities to build wealth.
..edit I didnt show the subsequent decline but if you are curious the Dow bottomed at 40, so someone who sold anywhere on this chart was considering themselves geniuses by the end.
The market then reaches resistance at the 200 day moving average and a very different decline begins that would go on for the next two years and would see the market lose 86% off that relief rally. My point of this is not to scare people, but to try to understand how investor emotions play into these cycles. Every market event will march to it's own drum but there are consistent human behaviors throughout. We are in an time period where being patient, not marrying a side, and staying flexible are the right choice.
I don't believe this is 1929 and I'm confident that most here are young enough to weather the storm if any. (ie I'm not against buy and hold) Now when we are in the mid 2030s and something happens like this, we may need to take a break from banging our cyber maids and pay attention since weathering a brutal bear market at that age may hurt more than it helps. Many are hitting their peak earnings range, even if you are bullish long term you should cheer a bear market as they are great opportunities to build wealth.
..edit I didnt show the subsequent decline but if you are curious the Dow bottomed at 40, so someone who sold anywhere on this chart was considering themselves geniuses by the end.
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Blazin
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Sanrith Descartes
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How much you want to bet the afternoon drop we are seeing in the indexes is retail investors reading a million headlines of "1 cent for oil barrels !!!!" And selling stocks because they have no idea what it means.
Sanrith Descartes
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Pops
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Blazin
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It's never happened before so that's not entirely clear how the contracts will be handled. But the nut of it is some will be paid to take delivery.
Sanrith Descartes
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I'm going to try to explain the oil thing-a-ma-bob.
The prices you are seeing ALL OVER THE NEWS is for oil contracts with May delivery. They expire tomorrow. So, if you own those contracts at expiry you are taking physical delivery of those barrels of oil. Much like stock options contracts, people don't really want the stock, they want to buy and sell the contracts. Imagine if you will ending up executing 100 contracts of AMZN stock at expiry. You would need to pony up 24 million dollars for the stock at current price.
There ain't no place to store this crude and all the pajama traders are realizing they don't want to own these contracts at expiry so they are dumping to avoid having to take physical delivery. And taking a huge loss in the process.
Now some oil folks, who might be have some place to store this here oil are basically saying to them sellers, if you pay me 8 dollars a barrel I will take it off your hands. Those guys who have storage capacity are getting paid to take the oil off someone's hands. They is making money.
Blazin
correct me anywhere I made a boo-boo.
The prices you are seeing ALL OVER THE NEWS is for oil contracts with May delivery. They expire tomorrow. So, if you own those contracts at expiry you are taking physical delivery of those barrels of oil. Much like stock options contracts, people don't really want the stock, they want to buy and sell the contracts. Imagine if you will ending up executing 100 contracts of AMZN stock at expiry. You would need to pony up 24 million dollars for the stock at current price.
There ain't no place to store this crude and all the pajama traders are realizing they don't want to own these contracts at expiry so they are dumping to avoid having to take physical delivery. And taking a huge loss in the process.
Now some oil folks, who might be have some place to store this here oil are basically saying to them sellers, if you pay me 8 dollars a barrel I will take it off your hands. Those guys who have storage capacity are getting paid to take the oil off someone's hands. They is making money.
Blazin
correct me anywhere I made a boo-boo.- 5
Sanrith Descartes
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Sanrith Descartes
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Blazin
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Are you implying hog futures are next? Could we see negative bacon prices?
Khane
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I can take delivery of bacon. I'll make room. Especially if you are paying me to do so.
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