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Jane Street barred from Indian markets as regulator freezes $566M

(www.cnbc.com)
518 points bwfan123 | 1 comments | 06 Jul 25 14:03 UTC | HN request time: 0.235s | source
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MichaelNolan ◴[07 Jul 25 00:02 UTC] No.44485321[source]▶
Anyone have any recommendations for books/papers/articles (math heavy is fine) that give a good steel man argument for why options and derivatives are beneficial?

I can wrap my head around why/how options for physical commodities give price stability for sellers and buyers. But at first glance I struggle to see how derivatives are beneficial in the equity markets. The argument is that derivatives increase market efficiency (more accurate pricing) over what just a simple buy/sell market would give you right? But how valuable is this increased efficiency? Obviously is super valuable to the people who work in finance, but how valuable is it outside of that context?

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1. PartiallyTyped ◴[07 Jul 25 00:27 UTC] No.44485452[source]▶
They allow for more flexible risk management (ie hedging), especially when dealing with margins or not very liquid tickers because they give you exposure to 100 units (%δ * 100) without requiring you to buy or sell them.

If you own stock, you can sell calls against it — especially if premium is high to hedge against drops. If you are short stock, you can buy calls to hedge against short term movement.

I personally don’t think they improve price discovery because market microstructure through options and mm exposure affect pricing.