I've always had trouble figuring out exactly what is happening at the end of the movie Trading Places. I've asked around and have not gotten any clear answers. Then, like a flash, I realized the Dukes were trying to corner the frozen orange juice market. I figured if anyone can explain, it'll be the product itself. So, please F.C.O.J. tell me what was happening.
Responses:
Pure Concentrated Orange Juice
Okay, here we go. It's been awhile since I've seen it.
Pure Concentrated Orange Juice
The Dukes were given a false report saying that there was a bad winter, thus they believe that FCOJ will be very valuable, since many oranges were damaged. Thus, they begin buying it the low regular price.
Pure Concentrated Orange Juice
Other people see this, and realize they must be on to something. The price rises. At this point, our heroes begin selling. If I'm not mistaken, they are selling on margin, which means they're selling without owning it. (You then buy it later to cover yourself.)
This is perfectly legal, and a good way to lose a lot of money if you're not careful.
Pure Concentrated Orange Juice
Anyway, the report comes out, and they realized they've been had. FCOJ will in fact be cheap and plentiful. Everyone starts selling, before the price drops too low. Of course, everyone is selling, so the price plummets. At this point, our heroes can buy the shares cheaply, and have made a ton of cash.
Pure Concentrated Orange Juice
Meanwhile, the Dukes have bought at a very high price, and sold at a very low. So they're ruined. Everyone else lives happily ever after.
Except for the Orange Juice, which was simply bought and sold, like some commodity!
