The activities of speculators are necessary in the futures markets in order to:
A)Prevent hedgers from trading options
B)Provide a continual stream of profit to hedgers
C)Maintain futures prices at appropriate levels
D)Understand the direction of future price changes

Question

Quizplus · Accepted Answer

Speculators play a vital role in maintaining futures prices at appropriate levels by buying and selling futures contracts based on their expectations of future price movements. This helps to ensure that the price of a futures contract is a fair reflection of the underlying asset's value and helps to provide liquidity to the market. While speculators may be motivated by the potential for profit, their activities ultimately benefit all participants in the futures market, including hedgers who use futures contracts to manage their price risk.

The Activities of Speculators Are Necessary in the Futures Markets