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the point of futures?
- Thread starter z32000
- Start date
Futures (and options) were created as a hedging vehicle. Speculation is just an ancillary use.
Quote from z32000:
just trying to figure what's the point of having futures if stocks already take into the consideration the future value of a company?
Futures started centuries ago to assure farmers that they would be guaranteed a certain price for next season's crops and livestock. They would sell the future, plant the seed, provide the finished product at the "futures" price.
And, yes, as a hedging vehicle. Check the historical charts on the Dow. From 1,000 to 1,000 over a decade before futures and options. From 1,000 to 14,000 in the 2 decades following futures.
Don
I think the OP is talking about single stock futures, not commodity or index futures.
Quote from Don Bright:
Futures started centuries ago to assure farmers that they would be guaranteed a certain price for next season's crops and livestock. They would sell the future, plant the seed, provide the finished product at the "futures" price.
And, yes, as a hedging vehicle. Check the historical charts on the Dow. From 1,000 to 1,000 over a decade before futures and options. From 1,000 to 14,000 in the 2 decades following futures.
Don
Actually, to get technical, what you are referring to in the farmer case (which is hedging, by the way) is forwards, not futures. Futures are just standardized, exchange traded forwards. Forwards still get traded in the OTC market, especially fixed income instruments and currencies. Either way, they serve the same purpose.
As for the differences between pre- and post- futures time periods let's keep in mind the differences in the economic situation. I'm not saying that futures trading hasn't contributed to the run-up, but things were pretty bad in the 70s.
Futures help minimize volatility
vectors101
Guest
just another way for wall street market makers and brokers to make money selling bogus insurance with 1 month expiraday and collecting fees from speculators.(gamblers)