In the futures markets,profits from speculation primarily arise because of the:
A) spread between the bid and ask prices on bonds.
B) illiquidity of markets for derivative securities.
C) high information costs in markets for derivative instruments.
D) difference in expectations among market participants about future prices of a commodity or financial asset.

Question

Quizplus · Accepted Answer

Profits from speculation in the futures markets primarily arise because of the difference in expectations among market participants about future prices of a commodity or financial asset. Traders who correctly anticipate price movements can profit by buying or selling futures contracts before the price changes occur. This is known as taking a speculative position. The bid-ask spread, illiquidity, and high information costs can also impact the profitability of trading, but they are not the primary drivers.

In the Futures Markets,profits from Speculation Primarily Arise Because of The