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bullcom wrote:
>
> I donīt think it will take my trading much further, but anyway. The derivates
> have been invented for hedging, speculators just offer the liquidity to keep
> it working. Take the commercials into consideration and think about the
> equation again. If you are long and the commodity moves up you can be sure
> that the commercials will pass on these price increase to the end consumer, no
> matter if he hedge future needs or not. So you are not taking some other
> traders money, you take the end consumers.
>
> Isnīt everybody doing exactly that?
>
> Regards - Ulrich
In a way you are correct but in another you are way out! Prices of
anything are set by the basic economic law of supply vs. demand. The
"Commercials" as you put it can choose to pass on these costs, but the
end user can also choose not to pay that expense. And a carefully
structured hedge locks in the price today for future commitment on
production...which is the way the real world works. MANY commodities are
sold far intot the future and both sides of the transaction must honor
their agreement. Hedging allows them to reduce their risk by locking in
prices.
And what about non-commodity futures (like stock indices)?
GM
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