Thread by @sainik636

1.The"Perfect Storm" of "Backwardation" & "Gamma Squeeze". Backwardation in an asset class happens when far month Future prices are lower than Spot prices, which is rare, since Futures are expected to be higher than Spot to take care of "Cost of Carry".

2. Backwardation can occur as a result of a higher demand for an asset currently than the contracts maturing in the coming months through the futures market.
Traders use backwardation to make a profit by selling short at the current price and buying at the lower futures price.

3.Take the case of Oil,Backwardation has been prevailing for quite some months & it has been as high as 5-7 %. Traders seem to have been very confident that Demand will fall off with the end of winter but that has clearly not happened. Now there is a scramble to cover.

4." Gamma Squeeze": Is a feature of the derivatives market as it forms part of options trading.When traders overwhelm the market by buying or selling a specific asset at a large volume, it can cause the market maker to buy out or sell their positions, leading to a large volume.

5.Apparently "Gamma Squeeze" is supposedly the cause of the Oil prices being stable at an elevated level. This combined with Backwardation is a potent mixture, which is likely to result in higher prices begetting even higher prices.

6. OI data on Oil Indicates that huge volumes of Call Options exist between $100 & $125. This should be a nightmarish script for Institutional Hedgers & Speculators who have taken the "short" side of the trade. Expect Fireworks in the next few months ahead.

7."Sting in the Tail": This is the chart of "Backwardation" in 20 of the 28 Commodities traded in the Major Commodity Exchanges. Such a phenomena has not been seen in 25 years.😳😱.

8. Just listen to 30 year veteran Currie of Goldman speaking about Commodity Markets just yesterday. bloomberg.com/news/videos/20…

9. @threadreaderapp . Please "unroll"