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In this example, the use of futures contracts isn't really gambling. Quite the opposite: it's insurance!

• uoaei 4y ago
  You can try to play word games all you want but they are faulty in a very transparent way. No one is falling for it.
  • Reason077 4y ago
    Faulty how?
• JumpCrisscross 4y ago
  > it's insurance What’s the person on the other side of the trade up to? This debate reminds me of the lead up to the Onion Futures Act, where moral outrage over speculation led to a ban and subsequent lack of insurance (and higher price volatility) for onion farmers. To the point that the son of the farmer who first lobbied for the ban returned to Congress to ask for its repeal. [1] https://en.m.wikipedia.org/wiki/Onion_Futures_Act https://en.m.wikipedia.org/wiki/Onion_Futures_Act
  • Reason077 4y ago
    > "What’s the person on the other side of the trade up to?" The same thing: hedging/insuring against price changes. The supplier (ultimately, a farmer, steel mill, gold miner, electricity generator, etc) is getting a guaranteed price for the commodity they're selling, reducing risk.
    • JumpCrisscross 4y ago
      Virtually no hedging happens between natural buyers and sellers precisely because they approach the market at different times, and don’t have the in-house pricing expertise to discern good and bad bids and offers ex ante. This is why, absent financial participants, the natural participants get hosed. (And why they use financial markets versus direct purchases and sales.) Again, these aren’t theoretical considerations, we’ve always had naïve Puritanical elements seeking to ban speculation, and in some assets and jurisdictions they have succeeded. Reducing market participation has never worked.