What are Options...

There are many Options... Option A, Option B but I always like to take Option C.
Hehehe, couldn't resist that one.

Okay, the Options I am interested in are very simple to understand and an award needs to be given to many pages on the internet for making it sound so awfully complicated. It took some time to sink in but once I understood, I was searching for creators of those pages with a whip in my hands... couldn't find them.

Let us start the simplification process. Lets say, you think that the sugarcane crop this year will be in demand and you want to buy it from farmer and sell it to a juice maker or sugar factory making some money (that's the objective, isn't it?) in the whole business.

However, there is still some time for the crop to be ready and you are afraid that when it is ready you may not be able to find a source, so what do you do? Simple, you go to a farmer who is cultivating sugar cane crop and tell him that you will be interested in buying his crop when it is ready after two months for Rs 2000 per tonne. You will pay him advance of Rs 100 per tonne for this. Now that farmer, depending on his reading of anticipated market scene after two months may or may not agree.

Lets say the farmer agrees to your offer and you pay him Rs 100 per tonne for this transaction which will be completed in future and voila... we are already financial genius. We have managed to create a option out of pure nothing... Hudini will be ashamed.

Hold your horses as I explain how this magic trick was performed in the next post.