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I wouldn't say there is any singular "point" to insurance such as "decreasing volatility". People buy insurance for multiple reasons. If a couple buys "trip i

by jasode 11y ago

I wouldn't say there is any singular "point" to insurance such as "decreasing volatility". People buy insurance for multiple reasons. If a couple buys "trip insurance", it's more about managing risk and uncertainty so they can sleep at night if their cruise ship is cancelled rather than smoothing over price volatility. Also, I'd just read the parent's quote about "insurance" as a rhetorical device[1] rather than some rigorous financial instrument. The author thought of SOs as "insurance" against missing out on potential upside. [1] both "insurance" and "lottery ticket" to describe stock options are analogies/metaphors

thedufer 11y ago
> If a couple buys "trip insurance", it's more about managing risk and uncertainty so they can sleep at night if their cruise ship is cancelled rather than smoothing over price volatility. To rephrase, they're definitely paying a small amount of money to avoid maybe losing a large amount of money. That sounds like the definition of decreasing volatility to me.