Rebecca Ponton, Oilman Magazine, interviews Keo Lukefahr, head derivatives trader at Motiva, here…
”People often think of energy trading markets as somehow similar to the stock market or the currency market. They are not. Those markets are merely price discounting mechanisms that reflect the current consensus value of an asset with an infinite (or at least indeterminate) lifespan. The energy markets deal in assets that are produced and consumed on a short time scale. Their purpose is to ensure the right energy product gets to the right place at the right time in the most efficient manner possible while allocating price risks to the entities that are best able to bear them.”
And this…
“ We are already seeing zero-dollar floors in physical crude contracts, for example.”
I was wondering if we would see a market in $0 struck calls (limited risk for the buyer) as a response to negative futures prices in April….
Do read the whole thing…
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