May

21

There is a market I am looking at to trade where supply is 100% controlled by a cartel and the same cartel can manipulate demand through marginal buying or selling, which they can store at zero cost for an unlimited period.  There are dealer firms that are approved by the cartel to buy at auction and resell in the secondary market.

There is an active futures market with electronic prices posted, but for the underlying cash market one has to pick up a phone and contact one of these dealers to get an accurate quote.

The cartel often hires its dealers to work for them directly and the opposite. These participants get relevant information in advance. The cartel wants the best prices available for the product it sells. However, at times they are willing to lose great amounts by bidding up prices to support the market.

The rhetorical question is, should I be trading this market?

Jeff Watson adds:

D. Humbert's query about trading an insider controlled market made me realize a very important rule that can be applied to trading. Never, ever play poker with someone who knows your hole card with 100% certainty.


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