For those who don’t know:<a href="https://en.wikipedia.org/wiki/Onion_Futures_Act" rel="nofollow">https://en.wikipedia.org/wiki/Onion_Futures_Act(which also banned box office receipt futures)A fun thing is to go on FRED and make a graph with prices from onions and, say, corn to see the differences in volatility.
I looked up onions, lettuce and tomatoes (because burgers), and the volatility actually looks very similar. Am I missing something or looking at the wrong things?Tomato: <a href="https://fred.stlouisfed.org/series/WPU01130217" rel="nofollow">https://fred.stlouisfed.org/series/WPU01130217 Onion: <a href="https://fred.stlouisfed.org/series/WPU01130216" rel="nofollow">https://fred.stlouisfed.org/series/WPU01130216 Lettuce: <a href="https://fred.stlouisfed.org/series/WPU01130215" rel="nofollow">https://fred.stlouisfed.org/series/WPU01130215
To reduce net risk for both parties, at the expense of also reducing chances of windfalls.To the farmer, futures mean no risk of having to sell when prices are low. To the buyer, futures mean no risk of having to buy when prices are high.The farmer also gives up the chance of selling when prices are high, and the buyer gives up the chance of buying when prices are low.The transfers go both ways, which is the magic.
You’re leaving out the speculators who usually end up assuming the risk of both the producer and buyer.
cwal37 · · focus · HN ↗
<a href="https://en.wikipedia.org/wiki/Onion_Futures_Act" rel="nofollow">https://en.wikipedia.org/wiki/Onion_Futures_Act
(which also banned box office receipt futures)
A fun thing is to go on FRED and make a graph with prices from onions and, say, corn to see the differences in volatility.
chirau · · focus · HN ↗
Tomato: <a href="https://fred.stlouisfed.org/series/WPU01130217" rel="nofollow">https://fred.stlouisfed.org/series/WPU01130217 Onion: <a href="https://fred.stlouisfed.org/series/WPU01130216" rel="nofollow">https://fred.stlouisfed.org/series/WPU01130216 Lettuce: <a href="https://fred.stlouisfed.org/series/WPU01130215" rel="nofollow">https://fred.stlouisfed.org/series/WPU01130215
gradus_ad · · focus · HN ↗
brookst · · focus · HN ↗
quickthrowman · · focus · HN ↗
brookst · · focus · HN ↗
To the farmer, futures mean no risk of having to sell when prices are low. To the buyer, futures mean no risk of having to buy when prices are high.
The farmer also gives up the chance of selling when prices are high, and the buyer gives up the chance of buying when prices are low.
The transfers go both ways, which is the magic.
quickthrowman · · focus · HN ↗