Like any futures contract, sugar futures allow the sale or purchase of sugar at a predetermined price for delivery at a future date. Futures allow physical market stakeholders, including producers, traders, processors, importers and exporters, to hedge themselves against the price volatility and risk. Apart from hedgers, speculators participate in a futures market by taking on the risk that hedgers seek to cover themselves against.
A speculator is one who normally tracks the market and takes an informed decision. In an ideal market, the proportion of hedgers and speculators should be 50:50 but this does not always happen. It remains a fact though that speculators help impart liquidity to a market and reduce the impact cost by narrowing the bid (buy)-ask (sell) spread.
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A speculator is one who normally tracks the market and takes an informed decision. In an ideal market, the proportion of hedgers and speculators should be 50:50 but this does not always happen. It remains a fact though that speculators help impart liquidity to a market and reduce the impact cost by narrowing the bid (buy)-ask (sell) spread.
Read more.
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