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Options markets help farmers and miners decide how much to invest in future production. Ditto the consumer of a commodity faced with an investment decision wher
by hollerith 1y ago
Options markets help farmers and miners decide how much to invest in future production. Ditto the consumer of a commodity faced with an investment decision where the success of the investment depends on continued access to the commodity.
- malfist 1y agoAre you thinking of the futures market? That's different than options
- hollerith 1y agoYes. My bad.
- steveBK123 1y agoOptions can be thought of as a form of insurance, so they have a useful purpose. In the simplest case you might hold a stock and a put to limit your downside for a set period of time.
- nimos 1y agoThe opposite is also true - you can use options to increase risk. I don't think insurance is a particularly good analogy in general.
- deleted 1y ago[deleted]
- steveBK123 1y agoI mean generally speaking derivatives can be used as insurance or for speculation, and a wide gradient of gray in between. By contrast, sports gambling is well, gambling. And importantly as we've seen in a lot of reports - the big online sports books essentially freeze out anyone who is good so that they are collecting revenue primarily from the.. innumerate. Of course you also have some markets like India without legal gambling and oversized derivatives markets that are unfortunately serving as a replacement. I'd also point out that you don't see the sort of degenerate nonstop advertising for options punting that you see for sports gambling. "Thanks for tuning into the ESPN FanDuel pregame show at the Caesars Superdome / and don't forget to stop by the DraftKings Sportsbook lounge." Followed by a barrage of other gambling ads in between plays.
- csomar 1y agoThey are roughly the same thing packaged differently. Both can be used to lock-in the price at a certain premium.
- mlrtime 1y agoThey are both derivatives but using a farmer as an example is 100% futures. For commodities, the Futures demand delivery of the underlying. Options are settles in cash.