Who are the players in commodity derivatives?
The commodities market will have three broad categories of market participants apart from brokers and the exchange administration – hedgers, speculators and arbitrageurs. Brokers will intermediate, facilitating hedgers and speculators. Hedgers are essentially players with an underlying risk in a commodity – they may be either producers or consumers who want to transfer the price-risk onto the market. Producer-hedgers are those who want to mitigate the risk of prices declining by the time they actually produce their commodity for sale in the market; consumer hedgers would want to do the opposite. For example, if you are a jewellery company with export orders at fixed prices, you might want to buy gold futures to lock into current prices. Investors and traders wanting to benefit or profit from price variations are essentially speculators. They serve as counterparties to hedgers and accept the risk offered by the hedgers in a bid to gain from favourable price changes. In which commodities
