Saturday, February 21, 2004

i wish the world of finance was like the world of life.

in the world of finance, you have something called derivates. derivatives are a type of security that comes from another asset, and you have two main types of derivatives, one being something called options (i.e. a stock option). a company can use an option to create a hedge, or a mechanism that protects it against certain forseeable risks. with an option, you have a strike price and a put or a call. a put is when you can sell an asset at a certain strike price. for instance, dell can have a put option to protect itself in case chip prices skyrocket. when the price of a computer chip reaches the strike price, which is directly correlated to chip prices, it can sell its call option and use it as a hedge and not suffer terribly by offsetting the price. anyways, that was much longer than i wanted.

i wish that we can form hedges in life. for instance, you can have a certain option on a relationship, and once your relationship goes sour and hits a low point, you can sell your option to offset the crappy situation and make yourself neutral without losing too much value, or in this case, sanity. for instance, you have a date with a girl. just in case the girl doesn't show up, or the girl turns out to be a freak, you set up an option... and if the girl happens to ditch you, you exercise the option and turn your crappy mood back into normal. now figuring out what an option could be is the challenge. it can't be a TV or a new car or anything like that really involves money, since you would be losing value, and you'd still feel crappy afterwards. maybe your mom's best cooking... but that would involve travelling quite a ways... and if you live at home, it wouldn't be anything out of the ordinary really. i need to think about this some more... this could be going somewhere.

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