Monday, December 28, 2009

26 miles of Oil Tankers!

Which Mish talks about.

So what is happening from QM perspective? As long as traders have a flexible supply of tankers, then they can use them for storage and make variance trades. As soon as the tanker supply shows stress, one gets quantum effects, the lot size (one tanker) begins to have noticeable round off errors. That signifies it is time for traders to engage in entropy trades. Mainly, see if you can buy a few tankers of oil in an optimum region, trying to match the size of the trade and maximize entropy.

Now a smart oil trader would have a special consultant doing entropy analysis on the distribution of tankers over time and region. QM Theory as it develops will incorporate the dual norms in trade optimizers. The result will be greater transparency because each party will have tools to measure the entropy loss or gain in trades.

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