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San Francisco Onion Futures Company

398 points · 179 comments · z-mach9

  1. cwal37 · · focus · HN ↗
    For those who don’t know:

    <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Onion_Futures_Act" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;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.

    1. chirau · · focus · HN ↗
      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:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;WPU01130217" rel="nofollow">https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;WPU01130217 Onion: <a href="https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;WPU01130216" rel="nofollow">https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;WPU01130216 Lettuce: <a href="https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;WPU01130215" rel="nofollow">https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;WPU01130215

      1. gradus_ad · · focus · HN ↗
        The weather affects all crops
        1. brookst · · focus · HN ↗
          But isn’t the point that futures trading reduces volatility from things like weather?
          1. brudgers · · focus · HN ↗
            The point is making money.
            1. mhh__ · · focus · HN ↗
              many users of derivatives willingly lose money on them because the purpose of these contracts is to transfer risk to those willing to hold it.
              1. brudgers · · focus · HN ↗
                Money is the thing at risk.
                1. articulatepang · · focus · HN ↗
                  People 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.

                  1. brudgers · · focus · HN ↗
                    Yes, it&#x27;s not about onions.
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