Which of the following statements about the presence of speculators in futures markets is correct?
A)Their main objective is to reduce their exposure to risk.
B)They aid hedgers by increasing the liquidity in futures markets.
C)They make it difficult for hedgers to find someone to take the opposite side of their positions.
D)Once a futures market participant is known to be a speculator he or she is no longer allowed to participate in the market.

Question

Quizplus · Accepted Answer

Speculators provide liquidity in futures markets by taking positions in anticipation of future price movements, which makes it easier for hedgers to find someone to take the opposite side of their positions. They do not necessarily aim to reduce exposure to risk, and there is no rule that prohibits someone from participating in the market once they are known as a speculator. In fact, many traders in futures markets are both speculators and hedgers at different times.

Which of the Following Statements About the Presence of Speculators