WHAT IS A WHEAT "OPTION?"

New Zealand Mail, Issue 1316, 20 May 1897, Page 5

WHAT IS A WHEAT "OPTION?"

Gambling in wheat and other grain is daily carried on in the great corn exchanges of America and the Continent. Attempts have at times been made by the Legislatures of various countries to abolish the option system, bub without success. Anti - option leagues have been formed, it being considered that the introduction of this practice has had much to do with the depression in prices. It is well, then, to get a grasp of the exact meaning of a wheat " option." Especially in view of the fact that this form of gambling may at any time be introduced into the Australian markets. A wheat " option " is a bet on the price of wheat at a given date in the future. Nominally, it is a contract to deliver grain on a certain date at a certain price; but in reality no one would be more surprised than the buyer if he had to take delivery of the wheat he had purchased, say two months before. He expects on the settling day to pay or be paid the difference in value of the grain on the day he bought and on tho nominal day of delivery. If the grain has fallen, he himself must pay the difference ; in the case of a rise he • pockets it. In the rules of the corn exchanges, delivery must be "contemplated"; but in practice this is disregarded. There is a distinction between an u option " and a ''forward" sale. The latter is a legitimate transaction, the former a pure bet. It is estimated that 90 times the wheat produced in the United States is annually disposed of in this way. It is there called " paper "or " wind " 'wheat; and it may be easily seen that these sales completely overshadow the sales of actual grain.