The top 5 reasons futures contracts succeed: 1. A commercial need to hedge risk 2. A deep pool of speculators 3. Goldilocks regulation 4. Competition 5. Volatility
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5 - In order for there to be price risk worth hedging, an asset needs to be volatile. If gold prices don't move, no one will trade it. If a stock doesn't move, no one will trade it. If oil prices don't move, no one will trade it. If yields don't move, no one will trade it.
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Examples of events that bring about new futures markets: The creation of Bitcoin 1990s natural gas deregulation The US moving off the gold standard 1880s rise of Chicago as a grain terminal
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This is a very thought-provoking paper on the rise & fall of futures markets for those interested: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.690.9771&rep=rep1&type=pdf#:~:text=Three%20elements%20appear%20to%20determine,too%20discouraging%20of%20futures%20trading ….pic.twitter.com/pXy5MFRvyB
Show this threadThanks. Twitter will use this to make your timeline better. UndoUndo
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not bad at all!
@HideNotSlideThanks. Twitter will use this to make your timeline better. UndoUndo
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