Speculators in futures and options markets
A)reduce the efficiency of these markets.
B)are acting contrary to U.S. securities laws.
C)accept risk transferred to them by hedgers.
D)reduce the liquidity of these markets.

Question

Quizplus · Accepted Answer

Speculators in futures and options markets accept risk transferred to them by hedgers. They provide liquidity to the markets and help in discovering the market prices. However, their actions may not always align with the expectations of the hedgers, which can lead to reduced efficiency in the markets. Speculators are not acting contrary to U.S. securities laws unless they engage in insider trading or fraudulent activities. They do not necessarily reduce the liquidity of these markets.

Speculators in Futures and Options Markets