Is it a bet on price fluctuations and against the house?
The answer depends on the specific instrument to which you are referring. It is possible to make straight bets that are cash-settled and in which the underlying commodity or instrument will never be bought or sold.  It is also possible to have such a contract be settled in the underlying (if the cash value is appropriate, then the cash settlement can be used to purchase the underlying directly, if necessary).  Physical delivery was predominant until the last few decades.  Most traders, as opposed to hedgers or strategics, are going to prefer cash-settled contracts as opposed to physical delivery. It is possible to make trades with a brokerage firm such that the firm pays if the trader wins the bet.  The firm will typically find parties on the other side to even out this bet and leave itself neutral as to the outcome (plus a small premium it charges each side for the cost of making the market).  The cost charged to one contracting party should be set by the dealer in relation to prices being charged to parties making the opposite, matching bet (in this way, brokers are following market price, while traders are setting it). Financially, options and contracts can be settled for cash or for the underlying, and they can be made directly with the opposite bettor or with a neutral dealer.
Long term gov't bonds fluctuate in price with a seemingly small interest rate fluctuation because many years of cash inflows are discounted at low rates.  This phenomenon is dulled in a high interest rate environment. For example, just the principal repayment is worth ~1/3, P * 1/(1+4%)^30, what it will be in 30 years at 4% while an overnight loan paying an unrealistic 4% is worth essentially the same as the principal, P * 1/(1+4%)^(1/365). This is more profound in low interest rate economies because, taking the countries undergoing the present misfortune, one can see that their overnight interest rates are double US long term rates while their long term rates are nearly 10x as large as US long term rates.  If there were much supply at the longer maturities which have been restrained by interest rates only manageable by the highly skilled or highly risky, a 4% increase on a 30% bond is only about a 20% decline in bond price while a 4% increase on a 4% bond is a 50% decrease. The easiest long term bond to manipulate quantitatively is the perpetuity where p is the price of the bond, i is the interest payment per some arbitrary period usually 1 year, and r is the interest rate paid per some arbitrary period usually 1 year.  Since they are expressly linked, a price can be implied for a given interest rate and vice versa if the interest payment is known or assumed. At a 4% interest rate, the price is At 4.04%, the price is , a 1% increase in interest rates and a 0.8% decrease in price . Longer term bonds such as a 30 year or 20 year bond will not see as extreme price movements. The constant maturity 30 year treasury has fluctuated between 5% and 2.5% to ~3.75% now from before the Great Recession til now, so prices will have more or less doubled and then reduced because bond prices are inversely proportional to interest rates as generally shown above. At shorter maturities, this phenomenon is negligible because future cash inflows are being discounted by such a low amount.  The one month bill rarely moves in price beyond the bid/ask spread during expansion but can be expected to collapse before a recession and rebound during. "BEFORE you invest in a house, make sure you account for all the returns, risks and costs, and compare them to returns, risks and costs of other investments. If you invest 20% of a house's value in another investment, you would also expect a return. You also probably will not have the cost interest for the balance (80% of ???). I have heard people say ""If I have a rental property, I'm just throwing away money - I'll have nothing at the end"" - if you get an interest-only loan, the same will apply, if you pay off your mortgage, you're paying a lot more - you could save/invest the extra, and then you WILL have something at the end (+interest). If you want to compare renting and owning, count the interest against the rental incoming against lost revenue (for however much actual money you've invested so far) + interest.  I've done the sums here (renting vs. owning, which IS slightly different - e.g. my house will never be empty, I pay extra if I want a different house/location). Not counting for the up-front costs (real estate, mortgage establishment etc), and not accounting for house price fluctuations, I get about the same ""return"" on buying as investing at the bank. Houses do, of course, fluctuate, both up and down (risk!), usually up in the long term. On the other hand, many people do lose out big time - some friends of mine invested when the market was high (everyone was investing in houses), they paid off as much as they could, then the price dropped, and they panicked and sold for even less than they bought for. The same applies if, in your example, house prices drop too much, so you owe more than the house is worth - the bank may force you to sell (or offer your own house as collateral). Don't forget about the hidden costs - lawn mowing and snow shoveling were mentioned, insurance, maintenance, etc - and risks like fluctuating rental prices, bad tenants, tenants moving on (loss of incoming, cleaning expenses, tidying up the place etc)...." This is copying my own answer to another question, but this is definitely relevant for you: A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). Going long, as you may have guessed, is the opposite of going short. Instead of betting that the price will go down, you buy shares in the hope that the price will go up. So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Similarly, the same is true in the reverse if you are going long. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible. Its all about speculation. Like stocks, real estate fluctuates and is sometimes volatile. Educate yourself on the house you are buying and the area it is in. I wouldn't spend over 20% of current net worth on a house. Its all a gamble. And you have to think realistically whether or not you can AFFORD losing all the value of it. "Yes. S&P/ Case-Shiller real-estate indices are available, as a single national index as well as multiple regional geographic indices. These indices are updated on the last Tuesday of every month. According to the Case-Shiller Index Methodology documentation: Their purpose is to measure the average change in home prices in 20 major metropolitan areas... and three price tiers– low, middle and high. The regional indices use 3-month moving averages, published with a two-month lag. This helps offset delays due to ""clumping"" in the flow of sales price data from county deed recorders. It also assures sufficient sample sizes.  Regional Case-Shiller real-estate indices  * Source: Case-Shiller Real-estate Index FAQ. The S&P Case-Shiller webpage has links to historical studies and commentary by Yale University Professor Shiller. Housing Views posts news and analysis for the regional indices. Yes. The CME Group in Chicago runs a real-estate futures market. Regional S&P/ Case-Schiller index futures and options are   the first [security type] for managing U.S. housing risk. They    provide protection, or profit, in up or down markets. They extend to the   housing industry the same tools, for risk management and investment,    available for agriculture and finance. But would you want to invest? Probably not. This market has minimal activity. For the three markets, San Diego, Boston and Los Angeles on 28 November 2011, there was zero trading volume (prices unchanged), no trades settled, no open interest, see  far right, partially cut off in image below.  * Source: Futures and options activity[PDF] for all 20 regional indices.  I don't know the reason for this situation. A few guesses: Additional reference: CME spec's for index futures and options contracts." "Yes, and the reason for that is because things that are above the market (eg regulators, politicians et al) manipulate it constantly.  I think personally the market is still a price discovery mechanism, the rules of the game have just changed. I.e. risk now has taken on additional dimensions, so a lot of conventional theories of asset pricing can effectively be chucked out the window.   Whether we ever see the return to a more ""econ""-driven reality in market expectations (and by that extent therefore asset pricing) is anyone's guess, for now bye-bye to the established light-touch framework of decades past, hello to interventionist randomness." Economically, you would say that purchased and rented real estate are not perfect substitutes--they are largely separate markets.  Only a few people are able to easily switch from one to the other and that choice is sticky--for example, once you buy a house, prices would have to rise a lot for it to be worth it to sell it and move into an apartment. In both markets there is a supply and demand curve, but the slope of the demand curve for houses to purchase is much steeper than the demand curve for rentals. The market for new housing fluctuates rapidly because it requires a large change in housing prices to change the number of people looking to buy a house.  Most decisions to buy a house are not driven by the state of the housing market.  This describes a supply/demand graph with a very steep demand curve.  Additionally, because of the leverage provided by mortgages, the demand for houses depends critically on relatively small changes in the interest rate and availability of loans.  Thus the steep demand curve shifts all over the place as borrowing conditions change. On the other hand, apartment prices are more stable because people easily move from one apartment to another and people living in their parent's basements easily move into apartments if prices change.  A small change in the price or quantity of rentals brings about reasonable response in quantity demanded.  This is the situation where the demand curve is shallow.  In addition, rentals are not tied to interest rates tightly, nor are they as strongly tied to economic conditions (in a recession, people avoid buying but renters continue to rent). I do a lot of sports betting and I’m heavily limited on some sites where I have had good winning streaks. Some of them are as low as $5 per game.  So yeah, the house definitely tilts the table if it benefits them.