The idea is to buffer changes in price. Started with crops originally iirc. Say I know I need 1 ton of seed for planting. It normally costs $5,000/ton. I am concerned that the rat epidemic might cause a seed shortage. It does. 1 ton of seed next year is worth $20,000. Because I purchased the future of 1 ton of seed for $5,000, I am not affected by this.
Made up numbers obviously, as I know someone is just waiting to “well akshually” me.
Made up numbers obviously, as I know someone is just waiting to “well akshually” me.