…shorting requires a [margin] deposit at zero interest rate, that is the key here…
That’s my email answer to the question I receive most frequently these days. Who can state the question?
Play *Jeopardy* at MarginalRevolution
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Why isn’t everyone who thinks that the high price of oil currently observed is due to a bubble putting their money where their mouths are by shorting the black gold?
Perhaps the point is that short selling is more common when interest rates are low?
Is short-selling a factor in the current economic downturn?
Who are three women who have never been in my kitchen?
Why can we still have bubbles even if short selling is allowed?
What is buying using FannieMae or FreddieMac?
dan: Cleopatra, Nefertiti, & the Queen of Sheba.
Ammianus: Why no oil shorts? Smart money does not bet when the deck is loaded. There aint no “free” in the current market for oil futures. There are more shills and proposition players at the table than you can shake a stick at. Some of them will get theirs, and some won’t. On the flipside, why don’t you go long on the price of oil staying above $100 over the next couple of years? Let us know how you do, when you get your computer out of hock, that is.
FYI most ISDA agreements specify interest on USD collateral at fed effective flat. That doesn’t negate the original answer, but it might divide instutions & private individuals incentives.
Why does the human heart long for what it cannot have?
What does shorting require, and what is the key here?
African or European Swallow?
Don’t the oil futures markets have symettrical margin requirements for both the shorts and the longs?
Oil (likely guess)
Presidential Futures (another great guess)
Housing (good application but doesn’t quite seem to fit)
…but Josh, has the best question so far! Full Credit.
“What does shorting require, and what is the key here?”
Why do kids love the taste of Cinnamon Toast Crunch?
it’s got to be about the presidential futures. Which is why it’s tagged “political science.” Wouldn’t it be tagged with “economics” if it was about oil/spec trading?
On Intrade, why is the “Hillary becomes President” contract trading at a higher valuation than the “Hillary becomes Democratic nominee”?
(Hint: Expiration dates. Although it’s hard not to like “because she plans to kill Obama post-convention”.)
I give up. What’s the answer?
Are there bootleggers at work in the push for anti-speculation regulation, or just Baptists?
sr – sounds right to me
I think the inTrade comments make sense in that margin is held for the potential losses as cash and apparently does not have a return. Futures traders hold margin accounts with interest bearing securities like treasury bills. The economic cost, however, is a negative return on the margin account, so the real interest rate is not zero.
A seller of treasury futures notes and bonds would hold margin in treasury securities. The sale would be a short and the margin would be a long. At the moment the trade is entered the margin rate would be zero for equally risky securities.
The key might be the debauching of currency that will eventually impair the value of treasury holdings. Traders can bet against treasuries with a zero net cost margin holding. The key may also relate to inter-exchange spread transactions like between treasury notes futures and agency notes (Fannie Mae, etc.) or Eurodollar futures. The margin interest rate would net against the holding cost (on both sides of the spread depending on the holding cost used).
I’ll play double jeopardy for my full bankroll Alex (well if you’ll pay me interest).
Why is there still a bid price on Al Gore to win the Democratic party nomination on Intrade? Why don’t hedge funds swoop in and make tons of money on these already decided events?
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