Thursday, June 02, 2016

The REAL Threat the "Quadrillion" Derivatives Market Poses to the World Economy

Just keeping it real folks:


leeholsen said...

Many people that have some money in the bank and a good occupation like an engineer think that they'll be okay when things like this come calling, but no one will be safe. Govts will take every asset a person has to keep itself afloat. Anyone who knows history, knows this.
There is only one thing you can do, "Enjoy the Decline".

grey enlightenment said...

Hmmm...but farmers sell futures to hedge, because they are delivering. They don't buy option contracts.

let's say framer john plans to produce one ton of wheat or he already has it. The spot price is $50 and he wants to lock in this price, but he is uncertain about the future. So he may sell a $52 contract (to deliver 1 ton of wheat) that expires in a year (the commodity is in contango) to lock in the price and then some. If it goes to $60 then he delivers the 1 ton, gets $52, and the buyer makes $8 profit. If it goes to $30, he still makes $2 but the buyer is out $22.