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by paggle
2367 days ago
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The core reason futures exist is to allow you to maintain more stable pricing of the products you sell, in the face of price instability in the products you buy. Let’s say you’re Pizza Hut and you want to run a Super Bowl ad advertising $5 pizzas for a month. But then a tomato sauce recipe goes viral in China and the price of tomatoes goes up 2x. Now your promotion might be costing you a lot more than you had planned. With futures you can buy the tomatoes today, to be delivered later, the farmer can get his money now and you van lock in your price now, insulated against increases in prices (with the farmer insulated against decreases). |
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