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Derivatives are nicely suited to speculate on the prices of commodities and other financial assets or on market variables like interest rates, market indices etc. Generally speaking, it is much less expensive to create a speculative position using derivatives than by trading the underlying commodity or asset. As a result, the potential returns are that much greater.
A classic case is the trader who believes that the increasing demand or reduced supply is likely to boost the price of oil. Since it would be too expensive to buy and store actual oil, the trader buys exchange traded futures (ETFs) contracts agreeing to take delivery of oil on a future delivery date at a fixed price. If the oil prices rise in the market, the value of the futures contract will also rise and they can be sold back into the market at a profit.
In fact, if the trader buys and then sells a futures contract before they reach the delivery date, the trader never has to take any delivery of actual oil. The profit from the whole trade is realized in cash without buying anything
What else can I help you with?
What has the author Sloan J Wilson written?
Sloan J. Wilson has written: 'The speculator and the stock market'
What does stock speculator means?
A Stock market speculation means - Predicting the price of a market entity (A Stock for example) in future. If the speculation is positive, we buy. If our speculation is negative, we don't bye or sellbuy low sell high
What did they call the stock market crashing?
It was plummeting in value.
What do you call a stock market which is neither bullish nor bearish?
chicken market
What are the stock market holidays?
In order to find out what the stock market holidays are, what days they take place, and when the stock market closes you could either call the stock market and ask to speak with someone about times or somehow get access to a schedule that tells you so.
What do you call someone who takes a financial risk?
A Financial Speculator.
What do you call a person who sells stocks on the stock market?
Seller
When you want to sell stock you either call or visit the stock market true or false?
False.
What kind of profession is speculator?
A speculator is a person who pays attention to market trends and then takes note of particular variables within an economy that may affect the value of a particular item.
How can the government prevent speculator from rushing into and of the country's market and disrupting its economy?
By using capital controls
What is the most effective option strategy for maximizing profits in the stock market?
The most effective option strategy for maximizing profits in the stock market is the long call option strategy. This strategy involves buying a call option on a stock with the expectation that the stock price will rise significantly. If the stock price increases, the call option will also increase in value, allowing the investor to profit from the price movement.
What is a property speculator?
A speculator of property
