The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be answering the question, “Why do options exist?” I think this is an important question to ask and one that I think not many people actually truly ask themselves or ask really even about the market. If options contracts exist in the market, then why do they exist? They don’t exist, so that we can just throw money back and forth between each other. They exist for an underlying fundamental purpose. And the reason that option contracts exist is simply for the transfer of risk from one person to another. It’s the same reason why insurance contracts exist because someone is willing to transfer their risk to another party in exchange for some sort of fee or compensation, however you think about it. But that’s really the fundamental reason why option contracts exist. If someone’s going to buy an option contract, say a put option contract that protects them in case the stock goes down, they are willing t