What is the function of futures speculation?
1 bears the price risk, which makes hedging possible. Participants in futures speculation bear the risks that hedgers try to avoid and transfer.
2. Improve market liquidity and increase trading volume in the futures market. Most futures speculators frequently establish and hedge positions, which not only makes hedging transactions easier, but also reduces the price fluctuations that traders may bring when they enter and leave the market.
3. Maintain the stability of the futures price system. Because of the strong correlation of commodity prices in various futures markets, the participation of speculators is conducive to the convergence of prices in different regions, and can also improve the relationship between supply and demand of commodities in different periods, thus maintaining the stability of the price system.
4 Futures speculation helps to form a reasonable price level. Profit-seeking is the natural attribute of speculators, who will buy goods at a lower price and then sell them at a higher price. The existence of speculators is conducive to the normal level of prices.
5. Maintain industrial balance. When speculators predict the future supply shortage, they will raise the forward price of commodities, which will help enterprises expand production and reduce the possibility of real shortage. On the contrary, when they expect excessive supply in the future, they will lower the forward price and reduce the industrial inventory in advance.
As one of the main participants in the futures trading market, futures speculators have also made indelible contributions to the healthy and sustainable development of the futures market. Their existence makes the futures market more dynamic and brings more possibilities to the futures market.