Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Path: utzoo!linus!wivax!decvax!microsof!fluke!ssc-vax!uw-beaver!tektronix!reed!cdi!metheus!tombl From: tombl@metheus.UUCP Newsgroups: net.movies Subject: Re: Trading Places Message-ID: <133@metheus.UUCP> Date: Sun, 3-Jul-83 20:20:48 EDT Article-I.D.: metheus.133 Posted: Sun Jul 3 20:20:48 1983 Date-Received: Thu, 7-Jul-83 02:09:15 EDT References: cbscc.114 Lines: 21 Regarding commodities trading: commodities brokers cover only a fraction of the cost of a commodity they buy or sell. They can, and frequently do, undertake transactions which exceed the total capitilization of their company. What happened in the movie was that the "buy" went out in anticipation of a rise in the price of orange juice concentrate futures. What the broker will be expecting to do is hold the commodity, perhaps for only for a matter of minutes, and then sell at the new (higher) price. In the movie, everyone got a "sell" at the same time (Dept. of Ag.) announcement. Clearly, the broker will want to unload the commodity as soon as possible -- but at that point no one was buying. Hence the drop in price as brokers become increasingly desperate. The buy at 30, or whatever it was, was a buy by our heroes, who at that point were holding nothing. They could reasonably expect the price to rise (so also could anyone else who happened to be following the action), probably to a level not too different than 100 where it started. Presumably they had the cash to cover themselves in the meantime, or could raise it either from other sources or by selling out part of their holdings at a lower price. The other brokers may not had the cash, or the confidence, to wait for the price to rise. Also, they had an opportunity cost to factor in.