This is useful. And yes, I probably have an inadequate understanding of the derivatives market (hence going out on a limb). Where I think the problem is, is th

This is useful. And yes, I probably have an inadequate understanding of the derivatives market (hence going out on a limb). Where I think the problem is, is the disconnect between actual supply/demand of the thing and the gambling about whether the price is going to go up or down. For example, as you say, most option contracts expire unexercised. In the context of TFA, where we're talking about where investment money can go, buying an options contract with no intention of ever actually exercising the option is effectively a complete waste of investment opportunity (compared with, say, building infrastructure in Africa). My point of view is that the derivatives markets in developed economies allows such pointless investments (aka gambling). If there wasn't a derivatives market, this money would be forced to go find something else to invest in. That might be government bonds as you say. Or it might be African infrastructure.