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Nicholas Carey
12-04-2009, 03:09 AM
The problem with commodities futures contracts...

is that when the contract comes due, somebody is required to deliver and somebody else is required to take possesion of the contracted commodity.

http://thedailywtf.com/Articles/Special-Delivery.aspx

Oops! :eek:

[what would you do with 56,000,000 pounds of coal...delivered to your office?]

In his defence, it appears to be a data error (XML. Looks like a poster child why you need to validate our XML against a proper schema. Tsk, tsk, tsk).

Henning 4148
12-04-2009, 04:14 PM
That's why I completely reject the idea of trading in pig bellies. Compared to tons of pig bellies, coal is nice!

Soundbounder
12-04-2009, 04:21 PM
The problem with commodities futures contracts...

is that when the contract comes due, somebody is required to deliver and somebody else is required to take possesion of the contracted commodity.

http://thedailywtf.com/Articles/Special-Delivery.aspx

Oops! :eek:

[what would you do with 56,000,000 pounds of coal...delivered to your office?]

In his defence, it appears to be a data error (XML. Looks like a poster child why you need to validate our XML against a proper schema. Tsk, tsk, tsk).It's not going to happen.
There is an aftermarket to sell it long before they are going to truck it to you house.
"Taking delivery" is just a phrase.

2MeterTroll
12-04-2009, 04:30 PM
sounds like it could not have happened to a more deserving fella. if he was as all fired good as he thought he could have taken a moment and spent less on a coal fired furnace for the office complex. i bit more thought he could set up a marketing contract to sell coal during the season as stocking stuffer's. Probably the first time in his life ha had to sell something real and he failed.

Nicholas Carey
12-04-2009, 06:01 PM
It's not going to happen.
There is an aftermarket to sell it long before they are going to truck it to you house.
"Taking delivery" is just a phrase.
Not true. A "futures contract" for a commodity is just that. One party is obligated to deliver the stated amount of the commodity at a particular place on a particular date (the settlement date); the other party is obligated to take delivery of said commodity at that place and on that day, paying, of course, the settlement price.

If the contract holder doesn't cancel the contract by purchasing a covering position by the settlement date, they are obligated to deliver/take possesion of the commodity.

Here's the rules for Central Appalachian Coal Futures Contracts (http://www.cmegroup.com/rulebook/NYMEX/2/260.pdf).

Sounds like this guy got hosed by a XML document that didn't conform to its schema. A bit got flipped as a result and the wheels turned to get his coals delivered to him. Whoops!

You'd think somebody would have caught it somewhere along the line, though.

salty87
12-04-2009, 06:12 PM
it's a funny story but delivery doesn't work that way. delivery is standardized along with the contract specifications.

i don't have a pdf writer....read page 2 of 12...Delivery...
"...delivery shall be made on the buyer's barge at the seller's delivery facility..."

a barge or fleet of delivery trucks won't just show up at your door.

pefjr
12-04-2009, 06:18 PM
The Commodities Broker will handle the re- purchase of your contracts before the contract date. Don't worry, you will lose money but you don't have to freeze 50,000 lbs of pork bellies. Stay away from commodity trading if you don't know what you are doing. Even if you do know you most likely will lose money, unless you broker is covering for you like Hillary.

Nicholas Carey
12-04-2009, 06:24 PM
it's a funny story but delivery doesn't work that way. delivery is standardized along with the contract specifications.

i don't have a pdf writer....read page 2 of 12...Delivery...
"...delivery shall be made on the buyer's barge at the seller's delivery facility..."

a barge or fleet of delivery trucks won't just show up at your door.
They will when your office is on a pier and when you tell your back office people to "make it so" -- over and over and over. Read the paragraph 3rd from the last:
As much as Brad wanted to deny it, he knew it was his. And not only that, but he had haughtily confirmed, re-confirmed, and re-re-confirmed with ∆xecor’s own back-office processing team. He had just assumed, like he always did, that the mouth-breathing paper-pushers couldn’t read English. As he played back the last thing he told one of the processors about the coal order – “what part of ‘execute my f*ing trade’ don’t you understand!?” – he wondered what he could possibly do with 56,000,000 pounds of real coal.

Edited to note: If he was the jerk he's made out to be, this was probably the support staff teaching him a [ expensive] lesson in manners.

salty87
12-04-2009, 06:34 PM
that reads as taken out of context to me...he confirmed and reconfirmed the programming specs

who knows, either way the delivery instructions are much more detailed.

pages 3-6 of the contract specs you posted detail delivery confirmations, intent to accept confirmations, notice of barge company the buyer will use, pre-delivery inspections to confirm the quality of the goods, etc. the exchange receives a copy of all paperwork.

so this office hired a barge company, inspector(s), whomever else. they also filed appropriate paperwork with the exchange and they've never done any of it before?

none of this even discusses testing procedures an exchange will mandate before allowing you to connect to their systems.

Soundbounder
12-04-2009, 07:20 PM
Not true. A "futures contract" for a commodity is just that. One party is obligated to deliver the stated amount of the commodity at a particular place on a particular date (the settlement date); the other party is obligated to take delivery of said commodity at that place and on that day, paying, of course, the settlement price.

If the contract holder doesn't cancel the contract by purchasing a covering position by the settlement date, they are obligated to deliver/take possesion of the commodity.

Here's the rules for Central Appalachian Coal Futures Contracts (http://www.cmegroup.com/rulebook/NYMEX/2/260.pdf).

Sounds like this guy got hosed by a XML document that didn't conform to its schema. A bit got flipped as a result and the wheels turned to get his coals delivered to him. Whoops!

You'd think somebody would have caught it somewhere along the line, though.As a former licensed commodity broker, thank you for the lecture.

There are plenty of urban legends around of investors taking delivery of truckloads of shrimp and coal and being forced to have a giant neighborhood barbeque with the commodities received.
I am sure that over one hundred years, there is a snafu or two where something got screwed up, but it is mostly urban legend.

If you bought crude oil, is the oil tanker showing up at your house?
No!!!!!
It is outside a refinery or a terminal waiting for the legal tranfers to be processed.

George Roberts
12-05-2009, 09:33 AM
The problem with the story is that just as buyers have no intent to take delivery sellers have no intent to deliver.