Personal Finance Resource Guide

James Buchan has observed the ideas of speculators are formed by their delusive concept of time; “The great stock market bull seeks to condense the future into a few days, to discount the long march of history; and capture the present value of all the future”

What is a future option?

well, the beginning goes back to the farmers and when we could not predict the weather patterns (if you think the weather men/women are bad now imagine how bad it was couple of hundred years ago).

So one day some smart farmer figured if he could sell his crop before he actually plant the stuff and get paid for it (or a portion of it) that would be very helpful.  He would guarantee some income and reduce his risk if things did not work out.  

If things worked out and his harvest was good then he could deliver his crop and all was good.  Then the person who prepaid him could get his promised deliverables and do whatever he was planning to do, may be sell it at the local groceries at a higher price and make a some gain.  Now remember, if the harvest was better than what the farmer thought he would lose some of his potential gains because he sold them for less than what he thought he would have - we will come back to this later, it is a component of risk.