Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=113085
Story Retrieval Date: 4/23/2014 11:01:47 AM CST
If buying and selling lumber futures contracts and raking in the virtual profits as the price rises and falls are your idea of a good time, look no further.
A staple of the visitor’s lobby at the CME Group’s 20 S. Wacker Dr. headquarters for the past five years, the popular simulation was recently released online in an attempt to reach a broader audience..
“The target audience is for people not familiar with the products we have, or finance and economics students who are studying the market,” said Allan Schoenberg, director of corporate communications at CME Group. Schoenberg related how he often wanted to play the game but the lines in the lobby were too long.
The simulation is deceptively easy. It lasts only two minutes and represents an eight week period of trading. Choosing to inhabit the role of hedger or speculator determines your course of action.
As a hedger, you are a home builder and have been hired to build a development over the next several months. To complete your development, you need to purchase five lumber futures contracts and lock in an average price of $300 or less. If you fancy yourself a savvy trader, the optimal result is to nab five contracts and simultaneously buy and sell others to slice off a profit.
As a speculator, your goal is straightforward: Buy and sell for maximum profit and end up with a net position of zero—owning no contracts—by the end of the two-minute session.
A feed of breaking news runs on the left side of the game. The price, and your resultant decisions, will correspond to developments in weather, mortgages, shipping, strikes, building permits, price indices, unemployment announcements and other real events that might affect the supply and demand of lumber.
I asked a derivatives trader, an accounting consultant, and a business journalist (me) to play the game and report back on how they fared.
Ready, set, trade!
Rubin Miller, a fixed income trader for Breakwater Trading LLC, walked two minutes in the speculator’s shoes and netted $239.
“The game is interesting in regards to the fact that there is a time aspect because you can do well and then a trade might look good but with 10 seconds left if you load up on buys and it keeps coming off you are in trouble,” Miller said.
An accounting consultant at Northern Trust Corp. played the game seven times in a row as a hedger. His highest score was $198.
“There were two instances where I didn’t find any contracts. It was fun. I understood what the economic impact was of what the news brought.”
This journalist finally figured out that there are tiny red and green arrows indicating whether various news items pointed to higher or lower lumber prices. Having thus cheated, I netted $154 and was digitally applauded by the game with “Congratulations! You are a spectacular speculator!”
I never knew.