For another analogy…say someone said “in 1 year, I will sell you...

For another analogy…
say someone said “in 1 year, I will sell you this house for a fixed price of $1,000,000, however, for this guarantee, you must pay me $100,000. So the total you’ll pay is $1,100,000 (house price plus the guarantee).

if you think the value of the house will go up to be $2,000,000, then you think, that’s a pretty good deal, I’ll take it.

if the year goes buy and the house is now worth only $500,000, you’re obviously now going to pay $1,000,000 for it, so you don’t bother, but you’ve lost the $100,000 you paid to lock in that price.

if the value of the house went to $1,500,000, you could sell your guaranteed price of $1,000,000 for $400,000 to someone else. They give you $400k, you’ve only spent $100k. You’ve made a december profit without ever needing the $1mil price of the house, but you were still able to benefit from the value of it going up.