For years, investors and traders have hedged and speculated on the future prices of a surprisingly varied array of financial products. One can place bets on the future prices of corn and cattle, hogs and hurricanes, coffee and currency, to name a few, by trading futures and options contracts.


IN PICTURES: 6 Ways To Make Better Options Trades

What Are Futures?
The concept of trading futures originated with agriculture: farmers sell crops that have yet to be harvested, or in some cases, planted, with the expectation that the crop will be ready to harvest by a certain date (contract expiration). The money that the farmer earns by selling the contracts helps ensure that the he will achieve a certain price for his efforts, and provides cash flow with which he can continue farming. Even if one doesn't understand the details regarding futures and options, one can see the potential benefit to the farmer and other market participants.

Betting On Artists
A 23-year old in London thinks that artists should be able to buffer their income in the same way. Tom Saunders is offering an "emerging artist derivative contract", a legally binding financial agreement said to be a work of art in itself. The intention of the contract is to provide purchasers the option, but not the obligation (just like a normal options contract), to purchase one of Saunders' works in the future - in 10 years to be precise.

Investors will pay Saunders £2,000 now for the option to purchase a future work for £1 in 10 years time. The idea behind the contract is that many artists do not mature or gain notoriety for many years - time often spent as a starving artist, or time spent compromising artistry for a paycheck. The money Saunders makes upfront selling the derivatives contract can cushion him financially while he is able to concentrate on his art, without feeling rushed to create. The resulting art, theoretically, should be better, more developed and more mature, than art that was produced out of financial necessity. (Painting isn't the only artform that offers futures. Find out more in Make Money On The Movies.)

The Purses Behind the Art
Great artists and aspiring artists have for centuries sought out pre-payment for their works to keep them fed and clothed while creating. Patrons of art, such as the Medici family in Florence, were famed financial supporters of some of the world's finest artists including Michelangelo and Botticelli. Without their patronage, and the fierce competition that their support forced, these greats may not have achieved such lasting notoriety.

The list of modern day patrons of the arts includes Bill Gates, founder of Microsoft, and music mogul David Geffen. True, much of the modern day support allotted to the arts comes in the form of paying vast amounts of money for works created hundreds of years ago. While this does not provide financial support for today's starving artists, it does keep art in the minds and hearts of a society that is frequently too busy and too distracted to appreciate it. The greatness of the art is subjective; however, the price a piece fetches is objective and can define the value of art - at least in terms of money.

Valuing Art
Therefore, it is true that as an investment, art can make sense. The art market is alive and kicking. With the markets cruising up and down, and gains being erased just as quickly as they are won, great art often stands still and holds its value. That is not to say that many of today's artists will emerge on top of the game and become one of the elite few who win hearts and set records. But a few will. It's an interesting idea to be able to examine an artist's work today, and predict if he or she has the talent to become one of the greats. (You don't just have to invest in art futures, you can also invest in art funds. Learn more in Fine Art Funds: A Beautiful Investment.)

The Bottom Line
The emerging artist derivatives contract, while is unlikely to become a mainstream, organized financial instrument, provides today's patrons an interesting way to support the arts, or, in this case, the future of an artist. Tom Saunders, whose exhibition will soon be on display at the murmurArt gallery (www.murmurart.com) in London, is a conceptual artist, which means his art can take a long time to be "born" and to develop. Finding financial support is crucial for artists like Saunders who need time to create without the pressures of deadlines and commercialism.

The art world might expect to see more of these emerging artist derivative contracts as a means of providing necessary patronage, as well as a unique investment instrument. Any of today's emerging artists could become a famously good investment. (To learn more, see Fine Art Can Be A Fine Investment.)

Catch up on the latest financial news in Water Cooler Finance: Crying Over Spilled Oil, And Buffett Goes To Court.

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