Farmers want a way to sell their crops before harvest time to guarantee a certain price, so they’re protected by unpredictable swings in price. A market is set up for commodity futures, so a speculator can take that deal, and maybe make a lot of money if the price she sets with the farmer is well below the actual market value. This is seen as a good thing because the farmer gets to reduce their risk, while someone else gets the opportunity to make money by taking that risk on the farmer’s behalf.
This system expands like a cancer, so professional investors are soon buying derivatives on all kinds of things. Sometimes this is arguably good for the world, but many times it’s just complex gambling, and it results in the housing-based financial collapse of 2007-08. Hedge funds and investment bankers manage to convince the regulators to let them keep the system as is, despite the crash.
Wall street pushes to allow random people with no financial power, no training, no knowledge to also be able to get involved with derivatives, because having idiots on the other side of their bets is great for their bottom lines. It’s much easier to make money from some random person using an app than it is to make money off another professional investor.
Some clever person manages to reskin a gambling app as if it were an investment app, and allows people to “buy derivatives contracts” on just about anything. Nobody honestly believes that this is anything other than gambling. But, the regulators are all compromised and toothless, so now you can gamble on any of the 4 horsemen: war, famine, death or disease.
I mean I actually like derivatives for hedging. I used to get 6 year contracts for electricity prices for my business. They saved my ass during covid/ Russia war. Prices climbed so fucking high that power contract became a financial asset. I like the fact that I can insure my stock portfolio with put contracts, I like that I can generate some income selling call contracts, and yes sometimes I even do short term speculation with options. If it’s good enough for Nancy Pelosi, it’s good enough for me! that being said it has gone way to far and there should be way more regulations and oversight because it is just a big casino and robin hood would let a child buy calls if it could access the phone.
Boiling frogs.
I mean I actually like derivatives for hedging. I used to get 6 year contracts for electricity prices for my business. They saved my ass during covid/ Russia war. Prices climbed so fucking high that power contract became a financial asset. I like the fact that I can insure my stock portfolio with put contracts, I like that I can generate some income selling call contracts, and yes sometimes I even do short term speculation with options. If it’s good enough for Nancy Pelosi, it’s good enough for me! that being said it has gone way to far and there should be way more regulations and oversight because it is just a big casino and robin hood would let a child buy calls if it could access the phone.