Dayrate Volatility
The science fiction book series Dune centers on interplanetary politics over control of the Spice, which allows users to “fold time” and travel to different galaxies in ways that would be impossible otherwise. Spice is mined only on the planet Arrakis, also called Dune, where a cartel tries to control production and distribution of the Spice. Numerous sci-fi fans and critics have referenced the similarities between the Spice cartel and ARAMCO, the oil cartel controlled by Saudi Arabia.
The Dayrate is one the metrics used to calculate oil price trends, since increased demand will increase the dayrates for the finite number of available drilling rigs and softening prices will result in lower dayrates to lock in contracts to keep as many rigs as possible in use. While supply and demand are the ultimate market determinators, profit margins can be manipulated by ARAMCO cutting supply, since dayrates are fixed for the duration of their contracts, as are longer term storage and transportation costs.
But dayrates drink down gallons of volatility. A bomb goes off in the Middle East and blammo, a big spike in oil prices because the presumption among oil buyers will be that demand remains flat while supply gets suddenly constrained. The higher risk proffers new contract dayrate increases. Weather and ocean turbulence increase offshore rig dayrates as well. As you'd guess, MonthRate, YearRate and well, DecadeRate volatiliies are usually, um, less.
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Finance: What is Volatility?77 Views
In finance allah shmoop what is volatility beta this thing
that's the symbol for volatility on the street we mean
the wall one not the mean one and it is
so commonly used that the in crowd members just say
beta when they're referring to volatility unless they're from tennessee
in which case they say you ve all y'all all
right so here's a siri's of stock prices stamped each
day that has lo ve all or low beta and
here's a siri's that has high beta dead man's pulse
versus rocky mountains Well what makes a stock volatile uncertainty
Think about it this way If everyone knew for sure
what a given stocks earnings would be for the next
ten years quarter by quarter and they also knew what
the overall markets average earnings would be in a few
other things like revenue growth and world conditions and we're
going to be war inflation there wouldn't be a lot
of guesswork The quote right unquote price today would be
thirty two dollars eighty three cents and the quote right
unquote rate of compounding would be eight percent in the
stock would slowly go up but this rate but in
non disney land riel life well nobody really knows much
of anything So stockcharts look like this and nerve endings
of wall street traders look like this Neither of them 00:01:19.771 --> [endTime] looked much like this chart So that's all you