Wall Street Begins Trading Water Futures as a Commodity

Re:Wall Street Begins Trading Water Futures as a Commodity by norswap on Saturday December 12, 2020 @09:10AM (#25398305)

I also expect there's a lot of "oh no evil finance people profiteering out of water!", which is of course a gross misunderstanding of what futures are.

Futures are useful if you're a farmer: it helps you precommit to a certain price of water to be paid in the future. You might pay more than you would if the price goes down, but also less than would if the prices goes up. It's basically insurance.

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Re:Wall Street Begins Trading Water Futures as a Commodity by joshocar on Saturday December 12, 2020 @09:24AM (#25398377)

In other words, in volatile markets it creates predictability. Farmers use futures for selling their produce. If we didn't have futures farmers would have no way to plan for the next year until they sold everything at the end of the year, which is very impractical. Instead they lock in their revenue and upgrade, repair, buy or sell equipment based on that. Since water is now a volatile resource it makes sense to do the same with that and lock in part of their expenses.

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