Coffee Read Online Free PDF

read of the Hunt Brothers cornering the
silver market and a few others, but this was still fresh.
    “Hell
of a thesis. The chances are good there’s someone behind it.
You’ve got it made - just write the paper, sit back, and watch
the University Presses fight to print it.”
    “But
Warren, this is happening tomorrow ! If we’re right,
there’ll be another one of these price spikes in less than
thirty hours. Do you know what you could do with this knowledge?”
    While
Warren wondered how to answer, Knut interjected, “Why on the
first Tuesday of the month?”
    “That’s
easy,” Warren said, happy to change the subject. “The
agriculture report comes out of the World Food Federation on the
first Wednesday. Their numbers can make markets crazy. They track
things like world crop conditions. If a weather or disease problem
is discovered which might lower supply, prices jump up.”
    “So
why the Tuesday before?” Knut persisted.
    “This
Global Growers guy wants to force up the price of Coffee for some
reason. He has a lot of money and coffee to work with, but still,
it’s only a fraction of the total coffee market. He wants a
lot of bang for the buck, so he works in a skittish market. What
better time than just before the ‘Ag’ report comes out -
when anxiety is high.”
    “Makes
sense to me.” Etty nodded.
    Warren
elaborated. “Since the numbers on Wednesday are so important,
everyone gets their underwear in a bunch on Tuesday, scared to death
that someone might get an early peek at the report. If some big
buyer comes into the market and starts buying like mad, bidding up
the price, the rest of the guys out there start thinking the buyer
knows something they don’t. They get nervous. Some can’t
stand it and start buying themselves. The price goes up and up.”
    “Global
Grower’s been at this a while, you’d think the market
would learn,” Etty realized.
    “Good
point. Probably won’t work too many more times. Others will
figure it out eventually. But you’d be surprised how many
things defy logic in our supposedly ‘efficient market’.
For one, the buyers and sellers change all the time in the pit where
they trade. It’s a burn out job - most don’t last a few
months. Each time Global pulls this, there may be a whole new group
of unsuspecting traders.”
    Knut burst in. “Come on, Etty, let’s get to the juicy
part.”
    She
paused while she planned her words, agreeing it was time for
specifics. “Warren.”
    “Yes
Harriet?” he mocked. “If you think I am going to buy
coffee for the Dartmouth Endowment Fund, you’re demented.”
    “What
if you just wanted to get the benefit of the price increase without
buying the actual investment?”
    “I’m
supposed to say, ‘I’d buy Coffee Options,’ right?”
    Knut
loved this game. “Bingo!” he yelled. “Now, Etty,
explain the Option dynamics. How does Global get paid with them.
I’m all ears.”
    After
smiling at the irony in Knut’s comment, Warren sat back, a
little impatient, and started bending paper clips into little loops.
He also knew options extremely well from years of using them as a
component in his stock funds. But, he decided to let Etty explain
to Knut, interested on how she might present a topic that many
people have difficulty ever understanding.
    Etty
turned to Knut. “Let’s say coffee sells for $100 per
unit...”
    Warren
interrupted, “Coffee sells in 2,000 pound lots.”
    Etty
flicked a vexing expression at Warren, then continued. “Let’s
say a hundred pounds of coffee is selling for a hundred dollars.
You look at price history, and you see that the price is almost
always between $98 and $102, with rarely any big jumps.”
    Knut
listened intently. “I’m with you.”
    “How
much would you pay for the right to buy coffee at $110, some time
over the next 3 months? An ‘option’ to buy coffee at
$110?”
    Knut
thought for a second. “Not much. If the price never goes
over 102, then the option to buy it