excersising oil futures
I have always been under the impression that no one, even non-speculators, excersises crude oil futures in order to obtain oil in its physical form.. however, after watching this video (http://www.cnbc.com/id/15840232?video=753749753) it seems this may not be the case. If what Rick Santelli is saying in the video is true, must this not therefore mean there has to be quite a lot of contracts that are excersied every month in order for oil prices to stay at such high levels?
Answers
3963 points
MNSL answered one year ago …
Most futures contract becomes worthless at the end of contract period. It is just like paper trading. We do not see any physical movement. I saw somewhere last year only less than 5% exercised in the rubber futures market in Singapore. I think Indian government banned dealings in the rubber futures market recently after studying market thoroughly. It is same in the oil futures market as well. Only few contracts are being exercised.
It thinks there should be some sort of control in derivative instruments in the financial world to prevent financial crisis and credit crisis in the future. Many with less knowledge and innocent parties including investors have lost their entire money due to due present credit crisis created by some institutional investors, property developers after trading complex derivative instruments through out the world.
No body wants to take the responsibility now and instead they are blaming others for their mistakes.
