Short-term speculators have raised their bets against the euro to record levels.
Positioning data from the Chicago Mercantile Exchange, often used as a proxy for hedge fund activity, showed speculators extended their short positions in the euro from 103,400 contracts to 113,900 contracts, or $18bn, in the week to May 7.
With complete contempt for society as we know it the markets attempt to bring down the Euro, utterly indifferent to the consequences for democracy, ordinary people, peace or anything else.
And you wonder why so many of us want hedge funds regulated?
Let’s start with defending society as we know it as the opening bid and move on from there shall we?
He gets his answer in the comments:
That’s not how futures markets work. There is an equal amount of long interest. Some people may be long but there is an equal amount of “speculation” or it could just as easily be “hedging”
To which our favourite retired accountant says:
How do you know
Why is the FT wrong?
Because of the way that futures markets work. By definition for every short speculator there must be a long speculator. For where is the short speculator going to buy his speculation from if it isn\’t from somone taking the other side of the bargain?
Think on it a moment. A short position is simply a bet. I think the euro is going to fall!
OK, great, now how can you make money out of that? Yes, that\’s right, you\’ve got to go along to someone show thinks that you\’re wrong. Someone who is willing to put their own money where their own mouth is. Someone, in short (sorry) who thinks that the euro is not going to fall. So, this other bloke, you give him some money (the premium) and if you\’re right in the bet and the euro does fall then you get some of the other bloke\’s (the long) money. If it doesn\’t fall, he keeps your money.
In an option, at least. With a future it\’s a even simpler. If the euro falls he gives you money, if it rises, you pay him.
By the very definition of it being a derivatives market there must be, by definition, as many longs as shorts.
Otherwise, who would the shorts be betting with?