If I'm a big company, like Delta, I want to make sure my profits are based on my efficiency at my core business, like operating an airline, not some random thing like the fluctuations of oil prices. So, I'd like to buy a contract that insures me against high oil prices. To pay for that insurance contract, I'd sell a contract that gives away my excess profits that might accrue if oil fell. These contracts are derivatives of oil, not oil itself.
A healthy derivatives market helps businesses focus on producing useful things for society. Every human should buy health insurance. Every big business should buy commodities and currency insurance (they don't call it that).
An unhealthy derivatives market encourages business to gamble rather than produce. GE Capital, before it got shut down, was at one point a bigger business than the rest of GE.
Just FYI, GE Capital didn't get shut down. Some of it was sold off, but it was mostly spun off into a separate company: synchrony financial. But yes, because it was overshadowing the engineering core of GE.
A healthy derivatives market helps businesses focus on producing useful things for society. Every human should buy health insurance. Every big business should buy commodities and currency insurance (they don't call it that).
An unhealthy derivatives market encourages business to gamble rather than produce. GE Capital, before it got shut down, was at one point a bigger business than the rest of GE.