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There's a legitimate, non-gambling use case: hedging against your existing position in GOOG. There's no equivalent instrument for sports.

BLKNSLVR 2mo ago
That sounds _exactly_ like a gambling use case.
- subtlejellyfish 2mo ago
  Only if you're buying the options naked. If I'm holding GOOG shares, I can buy puts to protect my downside risk (that's the hedge).
triceratops 2mo ago
> There's no equivalent instrument for sports. Options on the sports team's parent company. I mean you want to hedge against financial losses due to on-field performance but also commercial performance, right? What is the utility of hedging purely against on-field performance?
- subtlejellyfish 2mo ago
  1. Very few sports teams I can think of have publicly traded parents 2. On field performance has little to do with financial gains/losses outside of gambling.
  - triceratops 2mo ago
    > Very few sports teams I can think of have publicly traded parents Sure, but those are also the only kind where buying options to hedge losses makes sense. For privately owned teams, only the owner(s) ha(s|ve) any reason to try to hedge losses. They can buy some kind of "missed the playoffs" insurance, if anyone will sell it. Mostly though it's part of the game and they just deal with. > On field performance has little to do with financial gains/losses outside of gambling. Turning sporting outcomes into derivatives doesn't make it "not gambling" just because you say "but muh hedging strategy". On-field performance impacts commercial appeal and revenue. But ultimately hedging is about covering negative financial impacts, not betting on sporting outcomes. I think we're in agreement on this.
    - xp84 2mo ago
      > [Owners] can buy some kind of "missed the playoffs" insurance I suppose with Kalshi etc. they can today but "insurance" is just another word for 'betting whatever bad thing will happen.' So if an owner bought any kind of insurance that paid them if they performed poorly, I would assume they were going to do things to intentionally degrade their team's performance, and would hope the league would recognize this as extreme moral hazard and kick them out of the league.
      - triceratops 2mo ago
        > So if an owner bought any kind of insurance that paid them if they performed poorly It's the same as the CEO of a public company buying puts on their company's stock. I agree "derivatives" is a feeble excuse for sports betting.
brainwad 2mo ago
There no requirement to be long the underlying before buying them though. And most people trading options aren't using them this way. Hedging is a legitimacy figleaf for options, everyone knows that most of the volume is in speculation, especially from retail.

BLKNSLVR 2mo ago

That sounds _exactly_ like a gambling use case.

subtlejellyfish 2mo ago
Only if you're buying the options naked. If I'm holding GOOG shares, I can buy puts to protect my downside risk (that's the hedge).

triceratops 2mo ago

> There's no equivalent instrument for sports. Options on the sports team's parent company. I mean you want to hedge against financial losses due to on-field performance but also commercial performance, right? What is the utility of hedging purely against on-field performance?

subtlejellyfish 2mo ago
1. Very few sports teams I can think of have publicly traded parents 2. On field performance has little to do with financial gains/losses outside of gambling.
- triceratops 2mo ago
  > Very few sports teams I can think of have publicly traded parents Sure, but those are also the only kind where buying options to hedge losses makes sense. For privately owned teams, only the owner(s) ha(s|ve) any reason to try to hedge losses. They can buy some kind of "missed the playoffs" insurance, if anyone will sell it. Mostly though it's part of the game and they just deal with. > On field performance has little to do with financial gains/losses outside of gambling. Turning sporting outcomes into derivatives doesn't make it "not gambling" just because you say "but muh hedging strategy". On-field performance impacts commercial appeal and revenue. But ultimately hedging is about covering negative financial impacts, not betting on sporting outcomes. I think we're in agreement on this.
  - xp84 2mo ago
    > [Owners] can buy some kind of "missed the playoffs" insurance I suppose with Kalshi etc. they can today but "insurance" is just another word for 'betting whatever bad thing will happen.' So if an owner bought any kind of insurance that paid them if they performed poorly, I would assume they were going to do things to intentionally degrade their team's performance, and would hope the league would recognize this as extreme moral hazard and kick them out of the league.
    - triceratops 2mo ago
      > So if an owner bought any kind of insurance that paid them if they performed poorly It's the same as the CEO of a public company buying puts on their company's stock. I agree "derivatives" is a feeble excuse for sports betting.

brainwad 2mo ago

There no requirement to be long the underlying before buying them though. And most people trading options aren't using them this way. Hedging is a legitimacy figleaf for options, everyone knows that most of the volume is in speculation, especially from retail.