A farmer, unsure of what the price of his goods will be at harvest, can choose to sell the equivalent of what he thinks his yield will be on the futures markets. He sells his crop short (he doesn’t have it yet) to guarantee a price now, rather than take the risk of oversupply at harvest time and low prices. Just the most basic example of a short sale.
More generally, Markets go both ways - if you want to buy something, someone has to sell it to you. And you are buying because you have an idea of what the price will be in the future. Same thing with short sellers.
Options aren’t magic. Or nefarious. They represent a conditional buy or sell agreement. Nothing more. Current options contracts are formalizations of agreements you would otherwise have to reach with a specific counterparty, exposing you and them to additional risks (like if the call option they sold you would bankrupt them if you were to exercise it, so you never get paid…etc).
What you call gambling is what others call making a deal.
derdoktor12 karma
A farmer, unsure of what the price of his goods will be at harvest, can choose to sell the equivalent of what he thinks his yield will be on the futures markets. He sells his crop short (he doesn’t have it yet) to guarantee a price now, rather than take the risk of oversupply at harvest time and low prices. Just the most basic example of a short sale.
More generally, Markets go both ways - if you want to buy something, someone has to sell it to you. And you are buying because you have an idea of what the price will be in the future. Same thing with short sellers.
Options aren’t magic. Or nefarious. They represent a conditional buy or sell agreement. Nothing more. Current options contracts are formalizations of agreements you would otherwise have to reach with a specific counterparty, exposing you and them to additional risks (like if the call option they sold you would bankrupt them if you were to exercise it, so you never get paid…etc).
What you call gambling is what others call making a deal.
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