Comment by 8note
16 hours ago
the point of a system is what it does. if the futures market lets a bank make money off bread, thats the point of it
16 hours ago
the point of a system is what it does. if the futures market lets a bank make money off bread, thats the point of it
The profit to be made on futures trading is there to supply the capital needed to fund the benefit to the people selling those futures, i.e the farmers.
Accurately and fairly pricing risk is a whole field in its own right, one whose surface I have only lightly touched upon in my life by learning of actuaries and Black-Scholes. Free lunches don't tend to last long in finance, which means all profit margins everywhere, from share dividends and growth, to tresury bonds, to futures, to mortgages, tend to similar risk-adjusted real return.
That was certainly not the intention nor goal of the folks who first set up a futures market for flour in Chicago at the beginning of the previous century.