Derivative securities may be used to speculate on the future price direction of the underlying financial assets or to reduce price risk associated with holding the underlying financial assets.

Question

Quizplus · Accepted Answer

Derivative securities, such as options and futures, can be used for both speculative purposes (betting on the future price direction of the underlying asset) and to hedge or reduce risk associated with holding the underlying asset.

Derivative Securities May Be Used to Speculate on the Future