Financial Derivatives- explanation in Layman’s terms to understand why WTI crude fell to below zero pricing !! With an insight to Forwards and Futures with a simple example 1/3
It certainly reflects the ongoing demand supply dynamics where demand is all time low .. leading to traders / speculators to exit the futures contract at any cost . If they don’t they have to execute the contract and buy the whole delivery ..where will they keep ..2/3
These traders are not buyers .. they just put margin money .. invest and square off their deal when prices rise.. But now prices fell flat and they are not able to find buyers of their position .. So they are exiting by even paying back the buyer..Leading to negative pricing 3/3
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