A small London trading house reportedly made $500 million on oil's historic plunge below zero

Discussion in 'Commodity Futures' started by ajacobson, Aug 5, 2020.

  1. ajacobson

    ajacobson

    A small London trading house reportedly made $500 million on oil's historic plunge below zero

    Saloni Sardana
    Aug. 4, 2020, 11:51 AM

    [​IMG]Reuters



    • Bloomberg reported on Tuesday that a trading house called Vega Capital London made $500 million during oil's historic plunge below zero.
    • Oil turned negative in April when the commodity's May futures contract expired, meaning that anyone holding the contract would be forced to take delivery of the physical oil.
    • Vega, a small trading house in London, made huge profits by selling oil contracts just before the contract settled, sources told Bloomberg.
    • The trading house is now the focus of investigations by regulators on both sides of the Atlantic, Bloomberg reported.
    • Visit Business Insider's homepage for more stories.
    Oil prices turned negative in April, leaving traders on both sides of the Atlantic scratching their heads. But for Vega Capital London, the crash led to a $500 million jackpot, Bloomberg reported on Tuesday, citing people familiar with the matter.

    Oil turned negative when the commodity's May futures contract expired, meaning that anyone holding the contract would be forced to take delivery of the physical oil. With limited storage because of plunging demand due to coronavirus lockdowns, traders rushed to sell their contracts, with some paying to have others take it off their hands. That pushed prices below zero.

    Bloomberg's sources said several Vega traders sold the May contract in unison just before it settled at 2:30 p.m. in New York, netting massive gains and contributing to bearish pressure on the price.




    Read more: Fund manager Tom O'Halloran quadrupled investors' money in 9 years by betting on super high-growth companies. He explains his approach, and why new technologies could make the next decade even more prosperous than the 2010s.

    It is a strategy frequently deployed by Vega traders, one source told Bloomberg.

    The UK's Financial Conduct Authority and the US's Commodity Futures Trading Commission and CME Group — which owns the New York Mercantile Exchange, where trading took place — are investigating whether Vega violated any rules or contributed to oil's historic plunge, people familiar with the matter told Bloomberg.

    The FCA declined to comment to Business Insider, while CME Group and the CFTC were not available for comment outside of US business hours. The CFTC told Bloomberg that it would release a report on the oil-market crash later this year.

    Read more: MORGAN STANLEY: The government's recession response has the stock market heading for a massive upheaval. Here's your best strategy to capitalize on the shift.




    Bloomberg reported that Vega's selling coincided with a mass buyer departure, prompting the May contract to fall from roughly $10 at noon to zero at about 2 p.m. It settled at negative $37 per barrel.

    Oil prices have staged a dramatic recovery since then as economies reopened and OPEC cut production.

    Both major oil benchmarks traded above $40 per barrel on Tuesday.
     
    CannonTrading_Ilan likes this.
  2. Tradex

    Tradex

    The media loves to report "devastating" financial crashes in the stock or the Futures markets, but they rarely talk about the big winners who were on the other side of these "crashes"... :cool:

    Good article.
     
    Last edited: Aug 5, 2020
    dennis86 and CannonTrading_Ilan like this.
  3. zdreg

    zdreg

    The media talks about successes if they are followed by gov't investigations. It is the sin of envy.
     
    jys78 and Tradex like this.
  4. Tradex

    Tradex


    Here is a typical bad-news-sell headline : "Disbelief gives way to panic and despair as the stock market continues to drop furiously!"

    And here is something you will never see in the newspapers or on TV : "Trend-followers and put buyers are making out like bandits as the stock market continues to drop furiously!"
     
    Last edited: Aug 5, 2020
  5. newwurldmn

    newwurldmn

    Often a great or abnormal success is the result of illegal action. Not always, but often.
     
  6. jys78

    jys78

    Good for them!
     
  7. Poljot

    Poljot

    Imo psychical delivery contracts should not be allowed for retail.
     
  8. Overnight

    Overnight

     
  9. easymon1

    easymon1

    proper payola preceeds prudent procurement of profits. poor bastards.
    -
    Firm That Made $500 Million in Oil Crash Sued for Manipulation
    Aug. 5, 2020, 3:29 PM
    https://news.bloomberglaw.com/merge...00-million-in-oil-crash-sued-for-manipulation

    https://companycheck.co.uk/company/10179323/VEGA-CAPITAL-LONDON-LTD/companies-house-data
    Company Name

    VEGA CAPITAL LONDON LTD
    Company Type

    Private limited with Share Capital
    Company Status

    Active - Accounts Filed
    Incorporated On

    13 May 2016
    Nature of business (SIC)

    66110 Administration of financial markets -
    Accounts

    Available to 31 May 2019. Next accounts due by 28 Feb 2021
    Directors & Secretaries

    For a full in-depth analysis on each of these directors, click any of the links below
    Name Role Date Of Birth Appointed Resigned
    Mr Anthony Ross Gibson Director Jul 1972 13 May 2016 07 Jul 2017
    MR TOMMY GAUNT Director Jun 1980 01 Jun 2016 -
    MR ADRIAN SPIRES Director Jan 1976 01 Jun 2016 -
    Mr Dean George Scott Director Dec 1968 07 Jul 2017 02 Oct 2017
    MR ADRIAN SPIRES Director Jan 1976 26 Sep 2017 -
    Mr Tommy Gaunt Director Jun 1980 26 Sep 2017 23 Oct 2019
    -
    This is how it is done.
    https://www.washingtonpost.com/wp-srv/politics/special/whitewater/stories/wwtr940527.htm

    In commodities futures trading, an account that falls below the "maintenance margin" typically triggers a "margin call," where the trader must put up sufficient cash to cover the contracts. Although Hillary Rodham Clinton's account was under-margined for nearly all of July 1979, no margin calls were made, no additional cash was put up, and she eventually reaped a $60,000 profit.

    June 29 ......... $56,466 (Margin: Value account should have had to continue trading.)

    July 12 ........ -$24,243

    July 17 ......... $22,537 (Account value: Total cash on hand plus (or minus) paper value of contracts.)

    July 20 ......... $61,537

    July 23, 1979: She withdrew $60,000 and never traded again, closing the account in October.



    © Copyright 1997 The Washington Post Company

     
  10. Overnight

    Overnight

    Wasn't the fault of Hillary, was the fault of her broker. They chose to carry her risk.
     
    #10     Aug 6, 2020