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Commodities Briefing - Categorized | Financial, Investment, Trends more

The hedging abuse in commodity markets

Posted on 02 November 2012

The commodity markets were intended to help agricultural producers manage risk and find buyers for their products. The stock and bond markets were intended to create an incentive for investors to finance companies. Speculation emerged in all of these markets almost immediately, but it was not their primary purpose.
Hedging involves taking an offsetting position in a derivative in order to balance any gains and losses to the underlying asset. Hedging attempts to eliminate the volatility associated with the price of an asset by taking offsetting positions contrary to what the investor currently has. The main purpose of speculation, on the other hand, is to profit from betting on the direction in which an asset will be moving. Speculators make bets or guesses on where they believe the market is headed………………………………………..Full Article: Source


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VRS - who has written 36951 posts on Opalesque Commodities Briefing.


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