Which of the following is true regarding the options markets?
A) Hedgers and speculators both attempt to lower risk.
B) Hedgers attempt to lower risk, while speculators attempt to make riskless profits.
C) Hedgers and speculators are both necessary in order for the market to be liquid.
D) all of the above

Question

Quizplus · Accepted Answer

Hedgers and speculators both play important roles in the options market, but the market cannot be liquid without the presence of speculators. Speculators add liquidity and provide opportunities for hedgers to manage their risk. While hedgers attempt to lower their risk exposure, speculators are not necessarily looking for riskless profits, as they are willing to take on risk for the potential for higher returns. Therefore, option markets need both hedgers and speculators to function effectively.

Which of the Following Is True Regarding the Options Markets