Buying futures contracts to protect against a possible price increase of cash commodities that will be purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. At the time the cash commodities are sold, the open futures position is closed by purchasing an equal number and type of futures contracts as those that were initially sold. Selling futures contracts or initiating a cash forward contract sale without offsetting a particular market position. A market participant who tries to profit from buying and selling futures and option contracts by anticipating future price movements.
Speculators assume market price risk and add liquidity and capital to the futures markets.
They do not hold equal and opposite cash market risks. The price difference between two related markets or commodities. For example, the April-August live cattle spread. Also called exercise price. The amount of money option buyers are willing to pay for an option in the anticipation that, over time, a change in the underlying futures price will cause the option to increase in value.