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so what are the derivatives and what is the big picture heres the big picture yummy yummy yummy McDonalds okay so what are derivatives well derivatives are used to manage risk okay what brings risk to french fries and McDonald burger well lets think about the the word derivatives first what is derivatives derivatives means it derives from something else it derives its value from something else so something derive its value from something else and its used to manage risk well how does it work thats what the example McDonald and french fries now McDonald lets assume per year just dont quote me on the numbers Im just making this up lets assume they would need 1 million ton of potatoes thats what they need one million ton of potatoes every year and right now the price per ton again Im just making this number up the price per ton equal to one hundred dollars the price per ton now this is the spot rate and we talked about the spot rate okay but McDonald they need that 1 million no