Page 12 - Futures Money Machine-Study Session #1
P. 12
Futures
Unlike the hedger, the speculator (trader) usually has no contact with the
underlying commodity; he or she has no natural long or short position as
in the case of the hedger. The speculator is in the market to make profits
by buying low and selling high. Speculators are very important to a
market. They make it more liquid and often take the opposite side of
hedgers' trades. In this way, they act as a type of insurance underwriter
by bearing the risk which hedgers seek to avoid.
Key Point: Speculators are important to markets as they provide liquidity
that markets need to function.
