[wpietri]

> It’s pretty well known that commodity futures contracts are a game of hot potato

Very much so. I wrote software for financial traders in the 1990s, and I heard tell of a couple of clerks (in this context, sort of "trader intern") who thought they were smart enough to do a little commodity metal trading on the side. However, they didn't quite understand the details of contract expiration, and so supposedly they ended up with 25,000 pounds of copper delivered to somebody's parents house. Oops!

[simonh]

There are contracts that specify physical delivery, but they also specify the warehouse or storage facility the commodity will be delivered to. The buyer can either collect the commodity or pay the storage facility to hold it for them. It's not likely it would be delivered to someone's house unexpectedly, because someone would need to pay for the additional cost of transportation.

[wpietri]

Yeah, the way the story was told the thought they could save some money and the hassle of making a deal with a warehouse. Why pay for something they're never going to use? So they agreed to pay for transportation in the event of delivery, thinking they'd never get charged for it. But I could well believe this was a trader urban legend.

[quickthrowman]

A source to back you up, this is precisely how it works. The CME link goes into more detail on how physical delivery works for base metals.

Other physically settled commodity contract have different delivery locations, /CL (WTI crude) delivery takes place at a terminal and storage facility in Cushing, OK.

https://www.cmegroup.com/education/courses/introduction-to-b...

[beerandt]

Oil and gas also have the benefit of published prices for most pipeline transport, although you still need a buyer/terminal that's physically connected to the network to take delivery.

[centimeter]

That's fake. Delivery doesn't work that way. The contract will specify one or a few acceptable delivery locations, always some industrial shipping depot or something.

[bsder]

It certainly could be apocryphal, but ....

I thought the commodity was coal. And the issue was that the trader was at a fancy new office park with a river view that was an old dock specifically for coal.

[fhars]

There is this old story in the same vein (and of course also [citation required]): https://thedailywtf.com/articles/special-delivery

[baking]

Sorry, but this story is utter bullshit. Source is unreliable and the only link in the story is to the movie "Trading Places" and the maybe the "WTF Stock Exchange" might be a clue.

[sulam]

Sounds apocryphal.

[wpietri]

Could be! It was definitely a friend-of-a-friend territory. But often legends of failure are used to warn against real dangers. Little Red Riding Hood is surely fictional, but wolves in the woods definitely weren't.

And at least in Chicago in the 1990s, traders and clerks could definitely be wild. During slow periods on the CME floor somebody would get a transparent trash bag, declare it a $20 bag, and then walk around with it. People would write their names on $20s and throw them in. Once they'd made the rounds, they'd shake the bag and have somebody draw from it. I myself saw thousands of dollars change hands like this. And clerks would regularly bet one another about jumping into the Chicago river from Upper Wacker, which is a fair drop.

Or there was one incident that was witnessed by a couple of our traders, as it happened in their pit at the CBOT. One afternoon among all the colored coats, they see somebody in a polar bear costume walking around the trading floor between the pits. One trader turns to another and says, "I'll pay you $100 if you punch the polar bear." The trader thinks about it, takes the $100, goes over, lays out the polar bear, and then in the chaos goes back to his pit. This turned out to be a bad trade, as the polar bear was there as a fundraiser for the Lincoln Park Zoo, and one of the people on the zoo's board was also on the exchange's board. Oops!

[aluminussoma]

Also told on Page 34 of Ron Insana's Traders Tales: https://books.google.com/books?id=NyeVNsWvJHAC&pg=PA32&lpg=P...

[wpietri]

Holy moly! Yes, that's exactly when I was working there. Glad to know there's some confirmation for that one!

[dmurray]

Everybody has heard of this happening to their friend's cousin's ex's colleague. In practice you can't trade futures without a broker, and your broker won't let you take futures to delivery unless you convince them you have the facilities to deliver or take delivery. And if you do take delivery of copper futures on the main exchanges (CME or LME), you get "warehouse receipts" which entitle you to turn up at some industrial estate and collect your copper, and which can be resold.