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. mpmpmpmp · 1789863078 · focus · HN ↗

                  For 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.

                  1. brudgers · 1790028292 · focus · HN ↗

                     How many farmers do you imagine are in this thread?

                     And consumers neither lock in margins nor run a business because consumers buy at retail…

                     Ok charitably, maybe you use “consumer” in a special sense of businesses that consume raw materials such as owners of onion ring factories. In those cases, future prices (as opposed futures prices) are typically negotiated directly into contracts with producers of those commodities…and how many of those are in this thread?

                     In the vast majority of cases, futures are traded speculatively and physical delivery of goods and chattles is an extreme exception.

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