Ann: Company Update, page-172

Hi C'mon,

Yeah, subsequent to my post above, I also have read $USO exited most of their positions....but I still believe they have had a significant impact by helping "crowd" this market....how can you not when they held 30% of contracts! This, along with a number of speculators on May contracts with no intention to take physical delivery combined with the fear that US storage capacity is either getting full or committed, has created an unbelievable scenario only a few months ago! Apparently a few had the intention to take delivery, but when they started checking storage rates etc, had to sell. It's noted that the volume was fairly low in the later hours of trading....

Contagion
I think we are seeing the effects of this now. The fear is clearly in the market with the Jun20 contract falling 50% intra-day! Back up to 25% down at the moment....but i think we come back down a bit. I'm not shorting more though....!! My attempted arbitrage is working so far but i don't think i have accounted for the tail risks and will probably close out before they expose themselves

In terms of wider market contagion, i can see the S&P is already moving lower and there will fear that this could further hamper us long term deflationary spiral.....and you get the picture, you get big selloffs. Opened up a couple of small shorts on the SPY today too.

Market blowups
You're correct that a number of funds need to relay significant deposits and this should minimise exposure, but there are huge flow on effects into other areas such as banks writing options with their risk pricing models (who would have ever thought minus $37 could happen!). Just imagine them writing naked put options excluding this scenario....and you have big blowups. Some people have become incredibly rich playing this game...i know of a few people who have bigger gonads than me who have been writing OTM put options for the last couple months into each new month. They have made an absolute killing....can you imagine how much they would have made when prices tended negative?! It's interesting how market commentators are saying how light the volume was.....which makes you think about upcoming manipulation that could occur.