The activities of speculators are necessary in the futures markets in order to:
A) prevent hedgers from trading options.
B) provide a continual stream of profit to hedgers.
C) maintain futures prices at appropriate levels.
D)understand the direction of future price changes.

Question

Quizplus · Accepted Answer

The activities of speculators are necessary in futures markets to maintain futures prices at appropriate levels. Speculators take on risk and are not interested in taking or making delivery of the underlying asset; rather, they trade futures contracts to make a profit from changes in the price of the asset. Their buying and selling activity helps to provide liquidity and stabilize futures prices. Without speculators, futures markets would be less efficient and less effective at transferring risk.

The Activities of Speculators Are Necessary in the Futures Markets