If you are trading in the futures market and you don't have inside info or are not an actual supplier of the commodity, you are the sucker.
If you are trading in the futures market and you don't have inside info or are not an actual supplier of the commodity, you are the sucker.
To be fair, you could also be a real world user of a commodity and productively use futures markets. For example, an airline or trucking company using them to hedge fuel prices.
Sure, and increasingly those people are being played for suckers. The article makes that point.
Less so than those buying it for spot? They need oil one way or another, whether from a future contract or the spot market (or downstream thereof).
Then your average price is higher than average. I heard airlines don't use futures any more because they need to keep costs low.
Future exists to stabilize instantaneous commodity prices.
They also allow some insights on future demand, which can help you plan production of your commodity.
Look in the general sense that retail traders lose money you are right but that applies to all markets, sports betting and casinos. However I and many of my friends live in houses paid for with profits made from futures trading and none of us have inside info or supply commodities. It takes discipline, skill, risk management, emotional management and drive to make it happen but it does happen.
Isn't there a 50% chance you are betting on the "insider" side of it?
There's a <50% chance you'll make money off of it because it's zero-sum, and if insiders make money on average then other traders (i.e., you) have to lose money on average.
The issue is that the odds aren't actually 50/50 on you buying either side of the trade; one half will look like a better deal (and given public information, it is a better deal) so you'll buy that half. Then when the market resolves, it'll turn out that insiders knew some piece of information that made the other half of the trade a better choice.
So then the person who uses public information is actually the bigger fool than someone who uses no information whatsoever and just picks a side of the bet. If insiders know that a volcano is going to erupt and offers a 50/50 payout, people who know the historical improbability will bet that is will NOT erupt, thinking it is an easy payout. But there will be some idiots out there that bet that it will erupt based on dumb luck.
It's often true - index investors tend to do better than people who follow corporate prononcements.
If that was the case you'd start consistently buying the side that looks worse, which would align with insiders and you'd make money.
The insiders don't consistently have opportunities to profit from their information. It's not every day that the war against Iran changes direction, and that whale has to wait for the next 180 degree turn to make their move.
Yes. It's a conditional probability.
P(W | You're a sucker) = 0.5
actually futures market is hardest to rig compare to options and stocks but markets are also efficient they say.
hard to win at a game where 97% fail in the long run.
That logic would also extend to individual stocks, wouldn’t it?
It kind of can, but trading futures is trading termed contracts, kind of like options, but a bit stranger (and you can buy options for futures contracts too!) For a retail trader, you definitely are not in a buy and hold/invest mindset. Often people use futures as a hedge or for locking in prices for physical delivery- it serves a very real world problem.
If you consider 'trading' to be short term buying and selling of stocks, then yeah. Holding stocks long term is nothing like trading commodities though.
I suppose if you're shorting or trading options generally, yes to some extent.
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