Speculators

Commodity speculators have no inherent cash market price exposure and simply buy or sell futures contracts in an effort to make a profit. Simply put, speculators buy futures or options if they believe prices will increase or they can sell futures or options if they believe prices will fall. They may realize a profit if their expectations occur or a loss if they don’t occur.

A speculator could be a trader on the exchange trading floor known as a local, an individual investor, or a commodity fund. Speculators provide a very important role in adding liquidity to the markets. This liquidity enhances the markets’ efficiency for all participants.

Terminology

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