Which essential function do speculators bring to the futures markets?
A) They take liquidity out of the market.
B) They absorb any excess supply or demand generated by hedgers.
C) They create more variability in prices over time.
D) They provide loans and the margin requirements for hedgers.

Question

Quizplus · Accepted Answer

Speculators play a crucial role in futures markets by absorbing excess supply or demand, which helps to stabilize prices. They are willing to assume the risk that hedgers try to avoid, thereby providing liquidity and facilitating smoother market operations.

Which Essential Function Do Speculators Bring to the Futures Markets