4 ms·
The point is making money.
by brudgers 12d ago
The point is making money.
- mhh__ 12d agomany users of derivatives willingly lose money on them because the purpose of these contracts is to transfer risk to those willing to hold it.
- brudgers 12d agoMoney is the thing at risk.
- chadgpt6 12d agoIs insurance risking your money?
- brookst 12d agoYes of course. I’ve paid for car insurance for 30+ years and have never made a single claim. So far, for me, it’s a bad risk. I’ll keep paying though.
- articulatepang 12d agoPeople are willing to lose a small but predictable amount of money to avoid occasionally and unpredictably losing a massive amount of money. The former is a loss they can plan for and absorb. The latter might kill their business. Traders are often happy to take the other side of that trade because they can trade against many counterparties, collect a small premium from each one, and try to ensure their counterparties won’t all fail in a correlated way.
- brudgers 12d agoYes, it's not about onions.
- brookst 12d agoThe thing you’re missing: Would you rather have net profits of 20, -10, 15, -5, -10, 25, -5 year over year, or profits of 4, 4, 4, 5, 4, 5, 5?
- brudgers 12d agoIn what sense is “profits” not referring to money?
- brookst 11d agoDid you reply to the wrong comment? I said nothing of the sort. Your hung up on money, everyone is trying to explain that the exact same money is better when it is predictable versus erratic.
- brudgers 11d agothe exact same money Yes, it is about the money.
- mhh__ 11d agoYou may have liabilities or income that exist outside of financial markets e.g. if I have 500t of wheat due to be harvested I might want to hedge enough to guarantee I can pay my staff - ive locked in the price of wheat, I might make less money as a result but my risk is lower.
- mpmpmpmp 12d agoFor speculators yes. But for a farmer and the consumer of the goods they would rather lock in a margin for their goods and run their business than risk guessing what the price will be at harvest time or consumption time. It’s called hedging.