Thread

1. cwal37 · 1789793067 · 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 · 1789812062 · 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 · 1789818672 · focus · HN ↗

         The weather affects all crops

         1. brookst · 1789824972 · focus · HN ↗

            But isn’t the point that futures trading reduces volatility from things like weather?

            1. brudgers · 1789833946 · focus · HN ↗

               The point is making money.

               1. mhh__ · 1789837261 · 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 · 1789837952 · focus · HN ↗

                     Money is the thing at risk.

                     1. brookst · 1789867712 · focus · HN ↗

                        The 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?

                        1. brudgers · 1789868659 · focus · HN ↗

                           In what sense is “profits” not referring to money?

                           1. brookst · 1789909961 · focus · HN ↗

                              Did 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.

                              1. brudgers · 1789931174 · focus · HN ↗

                                 the exact same money

                                 Yes, it is about the money.

                                 1. mhh__ · 1789947767 · focus · HN ↗

                                    You 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.

                                    1. brudgers · 1790037956 · focus · HN ↗

                                       Wheat futures trading rarely involves any actual wheat.

                                       And rarely is done by farmers.

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