Puts let you hedge long positions, calls let you hedge short positions. Without that you'd have to liquidate much sooner so there would be more volatility. Mor

Puts let you hedge long positions, calls let you hedge short positions. Without that you'd have to liquidate much sooner so there would be more volatility. More abstractly derivatives let traders in one asset pay premia to offload risk to other traders who are more able to absorb it. This way everyone has what they want and the market functions more efficiently. It's very similar to insurance (and you can actually model insurance like a portfolio of long/short put+call options with a probabilistic (event dependent) multiplier.)