Greetings fellow 212ers! I have a few questions on futures trading, not because I’m doing any but because I want to understand it better.
You can invest in futures on say Brent Crude. You invest your $100 USD in a Futures Contract due to expire on 1st March. The price of Brent Crude that you enter in on is $69 USD.
Between now and 28th Feb’, the price drops to $65 USD due to Opec having a bunga bunga party and someone leaning on a valve and accidentally flowing a few extra million barrels of oil a day.
So that you dont have take delivery of your share of the 1,000 bbls of crude, you close your position on Feb 28th with a $4 USD/bbl profit. Hurrah!
Now my questions:
Who fulfils your position?
Youre selling your share to someone else, so are you selling to a buyer who has an urgent need and will pay over the the current market price?
What if there is no such buyer?
Is no such buyer a practical impossibility?