Why is the open interest in all futures and options contracts always so much higher than the total contract value of what is truly available for delivery. Silver soybeans gold crude sugar. Is it manipulation? Or is it just a function of the markets? 90 percent don't ever intend on taking delivery so the added liquidty just improves price discovery. Any thoughts?
Because there are speculators in the markets. Without speculators markets are not efficient. When speculators are right they are rewarded and when they are wrong they get punished. Speculators are rewarded when they bring prices to equilibrium and they get punished when they move prices out of synch with demand and supply.