e with quotations for actual cotton of
specified qualities made by their brokers.

"Options" and "straddles."

We now return to exchange "future" transactions regarded as a genus. In
addition to "futures" proper there are "options" and "straddles."
Options are single ("puts" or "calls") or double (that is, alternative
"puts" or "calls"). The "put" is a right to sell cotton within some
specified time in the future at a price fixed in the present, which need
not, of course, be exercised. The "call" is similar, but relates to
buying. It will be evident that the "put" is a hedge against prices
falling, and the "call" a hedge against their rising. The basis of
"options" is the same as that of ordinary "futures," i.e. middling
American cotton of "no staple," &c. Whether the purchaser of an option
gains or loses depends upon the price that he has paid in relation to
the gain, if any, that he makes out of his power. The price of options
of course varies: that of double options is always highest, but they are
little used. A "straddle" is a speculation on the difference between the
prices of nearer and more distant futures, which varies from time to
time, or on the difference between the prices of different kinds of
cotton. An example will make the nature of the straddle clear. Suppose a
dealer buys April-May "futures" at 4d. a lb. and sells the same quantity
of May-June "futures" at 4-10/64d. a lb. Then, whether prices rise or
fall as a whole, he gains if the difference between the two prices
becomes less than 10/64d., but if it becomes more, he loses. On the
other hand, had the dealer bought May-June at 4-10/64d. and sold
April-May at 4d. he would have gained in the event of the difference
increasing, and lost in the event of its decreasing.

Measures of steadiness in prices.

A question which has met with a good deal of attention is whether the
speculation, which has been encouraged by the various arrangements made
for facilitating operations in "futures," has steadied or unsteadied
prices. Before we are prepared to answer this question we must be
furnished with a precise conception of what is meant by "steadiness" in
prices. It is sometimes assumed that this is measured perfectly by the
standard deviation,[6] which is obtained by taking the squares of the
differences between the average and the individual prices, summing them
and extracting the square root. But obviously the information given by
the standard devia