COMPULSORY STOCKS IN DETAIL

First of all my apologies to all those who read my blog...I haven't been mailing off late due to some tight schedule...Went for the ops workshop that i was talking abt in my previous blog and made some nice friends..it was indeed nice in the sense that we were given the oppurtunity to know more abt arbitrage businessess as well as shipping. It was fantastic. I specially liked the class taken by one of our Crude traders on " importance of freight in trading" that was good...

...I went for kayaking this weekend and that indeed was an eye opener...I learned a big lesson..NEVER DO SOMETHING WHICH YOU DONT KNOW AND NEVER TRY TO SHOW OFF...I was literally lost in the waters...and Richard with whom i went showed his real colours when we reached midway. On reaching the middle of the kayaking lake he stopped kayaking and since i was too scared i was forced to kayak to the shore....he knew that i was scared and he used it against me by staying put without kayaking ......now never again in my life....!!!!even if i want to go kayaking i wont take richard...but during second round when he was sitting in front and me at the back i did gave back wht he gave me and didnt kayak at all...!!! he got what he wanted...haha...

Well i got some more write ups on compulsory stocks trading....here is it read and enjoy!!!! I am seriously getting interested in this topic....May be should start reading up on this one
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Every country that joins the International Energy Agency makes a commitment to put in place a strategic oil reserve equivalent to 90 days' net imports; this as protection against oil shocks. Holding oil is an expensive business, so various different models have evolved for fulfilling this obligation. Some countries (eg Germany, Japan) have government entities that physically own pretty much the whole volume, charging consumers for the privelege. Other countries (eg the US, the Netherlands) havegovernment entities that cover part of the obligation, relying on industry to cover the rest. And some countries just pass the whole problem on to oil companies.
Within Europe, where oil companies have a stockholding obligation, a system called ticket trading has developed. Basically this means that if your company's minimum stock level is higher than your obligation you can sell the right to buy that stock in the event of a supply crisis to a third party who doesn't have enough stock to cover their obligation. Pricing basically derives from a combination of OECD stock levels and the state of the futures market (obviously in a backwardated market, noone wants to hold physical products if they can avoid it, so they will pay more to buy a CSO ticket). Of course, if you think the structure will change significantly, you can go long./short as in a physical market, as long as you reconcile your position before the deadlines for reporting your arrangements to national governments...
...which brings me to the next area. Within Europe, different countries have radically different stock positions versus their obligations. As a result, a series of agreements between government set out the rules for selling CSO tickets between countries. Somewhat annoyingly, these rules vary greatly depending on which agreement your talking about, so when dealing with this area, you spend half your time talking to governments to try to get them to behave nicely. Also, every deal you do has to be agreed by any government whose country is involved in the deal.
Actually, all of this bureaucracy creates some very nice opportunities. The market is probably too complex to be quoted anywhere (no markers) so very few people know what's going on. As a result, margins can be very healthy, and arbitrage opporunities are legion.

**************Courtesy my "Kayaking mate" Richard

Well was reading "Rogue Trader" by Nick Leeson ..Really interesting...You people might be knowing Nick Leeson...the infamous guy who brought down bearings bank...Will write about it next time....

Meanwhile happy living