How does 6% compare to margins on other commodities?
Don’t oil ‘speculators’ have to close out their positions like other commodity ‘speculators’?
Commodity ‘speculators’ lose plenty often.
Are you saying the commodity trading rules are different for oil, and if so how?
6% was an example. The actual margin amounts are given in total dollars. It’s essentially a security deposit. The percentage varies based on the value of the contract and depends on the price of oil. In a basic sense, as the price of oil increases, the actual risk involved in speculation decreases.
The oil commodity trading rules are different in the sense that the margin requirements are different. This does not mean that oil is essentially a different commodity because it isn’t. Stocks, for example, require a 50% deposit. Stocks are not considered a commodity. The range is usually between 2% and 15% depending on the current contract value. Oil is not necessarily any different from hogs, corn, wheat, or any other instrument where people don’t actually want the product. Other commodities are subject to the same fluctuations (you may have noticed food prices increasing).
The problem with speculation - especially when speculation constitutes a majority of the demand - is that it becomes market manipulation rather than speculation.