God of Technology: Creating the Internet in Another World-Chapter 418: What Should We Do?

Compared to stocks and bonds, futures were harder to understand.

After all, stocks were just shares and bonds were just debt, but futures seemed way more complicated. 𝑓𝑟ℯ𝘦𝓌𝘦𝘣𝑛𝑜𝓋𝑒𝓁.𝑐ℴ𝓂

But after some discussion, people suddenly realized that futures were actually pretty simple too.

So-called futures were just agreeing on a price for goods in advance, then both parties signing a contract. When the time came, you’d take the contract and pick up the goods.

In other words, spot goods were actual tradable commodities, while futures were contracts between parties.

And the futures market was even simpler.

The so-called futures market was just everyone trading these contracts.

Take steel for example. Right now steel costs five copper coins per kilogram. A merchant goes to Roster Steel Mill and orders 100 kilograms of steel. Both parties sign a contract—in three months, this merchant can get 100 kilograms from Roster Steel Mill. He needs to pay 500 copper coins.

But after one month, with two months left until delivery, there’s suddenly a rumor that the world’s biggest iron mine has run dry. Iron ore prices shoot up, causing steel prices to skyrocket to 10 copper coins per kilogram.

This merchant thinks the risk is pretty high. He figures this world has no shortage of steel, and maybe in two months when it’s time for delivery, the price will drop again. So he takes this contract to the futures market to trade it.

Right now steel costs 10 copper coins per kilogram. With the contract, in two months he can get 100 kilograms of steel.

That means with this contract he can get 1,000 copper coins worth of steel.

The contract’s value has jumped from 500 copper coins to 1,000 copper coins.

After selling the contract, the merchant makes a pure profit of 500 copper coins.

This is the simple model of futures trading.

Actually, for fairness, futures trading mainly involves bulk commodities. The futures market constantly tracks the prices of these commodities, making futures trading prices super transparent.

Soon, people realized the benefits of the futures market. Through the futures market, you could achieve a lot of good things.

Investors could use futures contracts for hedging to avoid risks, or they could predict future price changes in the commodities within futures contracts and make money from price differences in the futures market.

Dawn Kingdom, Western Territory.

Church of Shepherding.

Continental Wool Guild.

The Pastoral Pope listened to his son Wool Ryan’s words and felt completely lost.

"You’re saying that this futures trading can at least make our business less risky?" The Pastoral Pope really couldn’t wrap his head around it.

"Yes, this futures market looks like the stock exchange and bond exchange—like it’s just trading contracts. But actually, if you do certain things with it, you really can reduce normal business risks."

Wool Ryan was quite certain.

"Explain it in detail. I still can’t quite understand." The Pastoral Pope sighed helplessly.

"Let’s say our Wool Guild predicts that in three months there’ll be a huge output of wool. When output increases, prices naturally drop. To prevent losses from wool prices dropping, we can sell wool contracts in the futures market."

Wool Ryan thought for a moment and explained with a smile, "If in three months the wool price really does drop, even though our spot trading—meaning our actual wool sales revenue—decreases, in the futures market, we already sold a batch of contracts at a higher price earlier, so we’ll make money on that part."

"This way, doesn’t it make up for some of our losses in the spot market?"

"As long as we can calculate the prices right, future risks will be way, way lower."

"Actually, our wool prices are pretty stable. Compared to wool, other bulk commodities like grain and steel have more unstable prices. Their producers need this thing even more urgently."

The Pastoral Pope listened to his son’s explanation and took a long time to fully digest it, finally showing an expression of sudden understanding.

"I see. I never imagined this futures market had this kind of trading method hidden behind it. I thought it was just for trading contracts."

"These three features from this Magic Net update, in my opinion, are really just the God of Technology wanting to speed up our mortals’ commodity trading and make the market more prosperous."

Wool Ryan said with a smile, "Through the Shopping Mall, all of our manufacturers’ products will have a pretty good consumer channel."

"Right now, Magic Net users are approaching 30 million, and that number keeps climbing. Dragon Delivery’s shipping is getting faster and faster and cheaper and cheaper. Once the highways are fully built, magic-powered vehicles become widespread, and the ultra-high-speed rail system is constructed, I believe the efficiency will be even faster and cheaper."

"These main Magic Net users have already shifted from being mainly magicians and nobles to these new professions from the magic-tech industrial age."

"These people usually adapt pretty well, so they’ll definitely accept Magic Net shopping. Once delivery prices drop, shipping speeds increase, and things get more convenient, these Magic Net users will shop online in huge numbers."

"Think about it—whatever you produce, 30 million people can see it. Of course, there’ll be way more people in the future. Won’t that make things easier to sell than before?"

"As for the second feature, that’s even simpler. Obviously not every workshop knows how to sell stuff, so manufacturing merchants and sales merchants can be separated."

"Workshop owners just need to handle production. After producing, naturally sales merchants will come buy and sell their stuff."

"Workshop owners just need to make sure their products are good quality and quantity, and of course control their costs."

"Just list it on the Magic Net and countless merchants will come looking for them, countless livestreamers and influencers will come looking for them to get their sources and then sell them."

"This world has no shortage of middlemen like me. Before, I could only sell our Wool Guild’s stuff, but in the future, won’t I be able to find better sources through this feature and sell those? Of course, given my special position, I probably won’t try that, but others are different."

"Plus this feature can work together with that Shopping Mall feature."

"One handles retail, one handles wholesale, plus you’ve got the futures market for risk hedging. It’ll be hard for the market not to prosper."

The Pastoral Pope listened to his son’s words, his head buzzing. He never imagined this Magic Net update was essentially about this.

"So tell me, how should our Wool Guild respond to this update?"