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by HWR_14
77 days ago
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Just like other forms of insurance, you pay a small amount regularly to avoid a large loss. Saudi Aramco stock gives you dividends of X, you regularly pay Y% for insurance in case the Straight of Hormuz closes. When it does, you get the same income. Obviously, that amount will be less than X. Other people, who don't own Saudi Aramco stock make a small amount of money regularly and occasionally have large losses. Ideally, they make a lot of uncorrelated bets and so they are always making a bit of cash on 99% of contracts so they can afford the losses on the 1%. |
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