On April 20, 2020, a group of nine traders in London’s commodities markets, including a man known as Cuddles, made a profit of $660 million in just a few hours. This feat was made possible due to the crash of oil prices, which temporarily went negative. The traders were able to capitalize on this unusual occurrence by predicting that the price of West Texas Intermediate (WTI) crude oil would end the day at $5, down from its starting price of $10.
To do this, they first purchased 50,000 barrels in the TAS market, agreeing to purchase the oil at the price it settled at by 2:30 p.m. They also began selling regular WTI futures, starting with 10,000 barrels for $10 and then selling more as the price fell, accelerating their selling as the settlement window approached. This helped to push the price lower until it eventually settled at $5. By this point, the traders had sold as many barrels as they had bought and were not required to take delivery of any physical oil.
This type of trade, known as a “short squeeze,” is not uncommon in the world of commodities markets. However, the fact that the traders were able to make such a large profit in such a short period of time has attracted the attention of regulators. This is especially true considering the unique circumstances surrounding the crash of oil prices, which was largely due to the impact of the COVID-19 pandemic on global demand for oil.
For entrepreneurs and businesses, it is important to be aware of the factors that can affect commodity prices and to stay informed about market trends. This is especially relevant for those involved in the forex market or those who have an interest in finance. By keeping up to date with these developments, it is possible to identify opportunities for profit and to make informed decisions about investments.