The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1891-02-01
DEALING IN OPTIONS,
Or Gambling in Farm Products.

!
wheat at 81 per bushel, deliverable at
sellers option in December. There are
also forms of option dealing which boards
of trade do not recognize as regular, but
wink at, such as puts and calls" and a
] process obtains called 'wringing out,
whereby vast majority of deals are daily
settled by kind of clearing house opera
ton without any semi lance of delivery.
Under the contract suppose A has the
option Of delivering the amount of wheat
named at such time, during the month OF
| December, as he may elect, the term op-
ton having reference solely TO the time
/ when-during the month named-the
seller may declare the contract matured,
! but not one such contract IN a thousand
is ever carried into effect by the delivery
| OF property, il being a matter Of common
/ nOtOriety that in at least 999 out of every
! l 900 such transactions A neither owns or
! expects TO own the grain he contracts to
sell and deliver, nor does B. expect to re-
ceive the wheat he has entered into con-
/ tract to receive and pay for, the tacit I'M
/ Outstanding being that should the price of
/ wheat, at maturity of contract, have ad-
vanced TO 81 o. per bushel A shall, instead
! of delivering to B. 10000 bushels pay him
the difference between the then market
! price and the contract price, which being
| ) cents per bushel, A pays b $500. On the
other hand, should the price have declined
5 cents, b. would settle the deal by paying
$500.
In all time contracts entered into upon
Boards of Trade-and this term IS used to
designate all exchanges where such con-
tracts are made-with very rare exceptions
neither seller nor buyer own, or expect TO
own, single pound of the commodities in
which they pretend to deal; nor do they
contemplate the delivery or receipt Of such
commodities. But each hopes the price
will turn in his favor and enable him to
win. Thus, the transaction bears the
same relation TO commerce as does wager
upon horse race; the only difference be-
ing that in one case a definite sum is at
stake, while in the other the wager is an
indefinite one that the price Of wheat, IN
some future month, Will vary from
stated sum: the amount of the wager being
measured by such variation, and the win
ming party is determined, not by supply
and demand, but by as incalculable con
tingency as the preponderance OF the bull
or bear element when the contract ma
lures.
After the making of such a contract A
is short of December wheat and is desig-
mated as a bear" and is long of Deem
Der wheat, and is classed as bull"
As nine-tenths of the time more option
dealers are interested in depressing than
in advancing prices, the weight and intlu-
ence of the speculative body is almost con-
First comes the constitutional bear. who,
from long habit of thought or pessimis
tic tendency, has come TO believe prices
are always too high; then the professional
bear, who, knowing it is easier to depress
than to advance prices, sells below
the current price, property he does
not own and whose winnings, depending
upon lower prices eXerts his ingenuity in
eXaggerating the extent of the supply and
fabrication of such reports of failures,
panlcs, stringent money markets and the
great breadths of, and favorable conditions
surrounding the growing crops as VIII
tend to cause the Longs" TO become panic
stricken, and throw their holdings on The
market and thus depress prices 10 point
that viii enable him to win. Next comes
the Spectator, who, being convinced 1
prices are too low and must advance great /
ly, intends TO profit by the expected rise, !
but, being "out of the market" and desir |
ing to get in as cheaply as possible, be- /
comes an active and INSCRIPTIONS bear, !
eXerting himself 10 the utmost to depress |
prices that he may buy the more cheaply /
and increase his margin for winnings. |
Thus the efforts of nearly all the devotees !
at this singular commercial shrine make /
for lower prices, being effectively aided by
a constant fear, on the part of holders, /
that prices will recede and entail loss.
The bears act upon the knowledge that /.
improbable tale of disaster will have an /
influence, hence when they raid the mar
ket the air is thick with rumOrs Of fail /
ures, panics and widespread commercial /
coupled with the offering of more f.
grain than there is in the country, the re-
suit being that the bull becomes, in turn,
nervous, timid and then panic-stricken,
and being unable to respond to calls for |
margins" throws his grain
overheard, adding greatly TO the swelling
tide and helping TO further depress the
price
Large holdings OF fictitious products, on
the part Of the bulls" are as great a
menace to the ability of prices as are the
immense offerings of the bears" and when
suit in disastrous effects upon prices and
the p osperity of the producer.
The SenSeleSS terror which SelZes the
bull " often causes his inability to re-
spOnu to calls for margin" is one of the
most serious phases of option dealing,
making of the 'bull" a most effective in
strument in producing a rapid and great
in values; hence the operations
speculative "bull" and bear" are equally
to be deprecated and equally harmful
a among thousands of Others, having
contracted 20 deliver what he does not own
and is unable to buy except at a price
greater than that az which he has agreed
to sell, resorts to all conceivable devices
and MISREPRESENTATION TO break the
marke, and SO cheaper products before the
of his contract as TO leave
difference in his favor, or that enable him
10 buy a like amount Of speculative grain
az price lower than that named in his
contract with B.
What with the multitudes Of bears
with contracts maturing and contingent
)t "Dull' anxious to get in on breaks"
an immense majority of s0arul arprs ara I
ever working for lower prices and offering
million on million of fat products and
with each drop in price, having a profit,
multiply the offerings such addi-
.ional tenders further depressing
prices and thus. without possessing
! fraction of the products offered. these
men are, by one round in the grain pits,
able TO depreciate in value the entire grain
product OF the country: such depreciation
represents larger part OF the
years earnings of millions Of farmers.
How different is the course OF the
legitimate dealer owning or having the
means of producing the commodities Of
erred for sale All his efforts are directed
.owards securing good prices, steadiness in
demand and freedom from rapid ana wide
oscillations in values The seller VINO Is An
)wner OF property never depreciates its
-alue nor does he depress prices by offer
ngS of impossible quantities which il
would be impracticahle 10 deliver. On the
)ther hand the option dealer ! such an
exceptional Of civilization and short sell
NJ such a singular commercial method
hat dealer and method are aiike.unique
)eiug the only person and method ever !
Engaged in systematically deprecIating
what the person proposes TO sell by such
method and such phases OF option dealing
md Board Of Trade methods are not
naplty characterized in the following
paragraph from a recent issue OF 4 leading
-hicago journal;
The trouble with the Board OF Trade !
Gems 70 be that instead OF being, as u
,ught 70 be. body OF intelligent
merchants devoted 10 the advancement Of