Who trades commodity futures and options and why?
The first group of participants in the commodities and options markets are commercial and institutional users of the commodities they trade. For example, a company or individual who holds an asset such as coffee, corn, soybeans, U.S. Treasury bonds, or a portfolio of stocks, wants the value of that asset to increase. That person also wants to limit, if possible, any loss in value. The company or individual may use the commodity markets to take an opposite position that can minimize the risk of financial loss from holding those assets when and if their price changes. This is form of futures trading is called “hedging.” Other participants are speculators who hope to profit from changes in the price of the futures contract. A speculator buying a contract or call option, or selling a put option, hopes to profit from rising prices, while a speculator selling a contract or call option, or buying a put option, hopes to profit from declining prices. Because, unlike a hedger, a speculator does
