One difference between a hedger and a speculator is that the hedger
A)may have either a profit or a loss.
B)may not close out his position by taking an opposite position.
C)does not have to put up margin.
D)faces a risk without the futures contract.

Question

Quizplus · Accepted Answer

A hedger is using futures contracts to reduce or eliminate the risk associated with a particular asset or commodity. Therefore, they already have exposure to the risk without the futures contract. In contrast, a speculator is taking a position in the market with the intention of making a profit, without necessarily having an underlying position to hedge. Therefore, a speculator's risk is due to the price movements in the market, rather than exposure to an underlying asset or commodity.

One Difference Between a Hedger and a Speculator Is That