Question

Define and explain hedging and speculation in futures trading, bringing out their role and significance in risk management and price discovery.

27 Feb 2026
Answer :
Word Count : 482
Hedging and speculation are two fundamental concepts in futures trading, each serving a distinct purpose in commodity markets and contributing to the overall functioning of the market. Hedging is a risk management strategy employed by market participants to protect themselves against adverse price movements in the underlying commodity. It involves taking a position in the futures market that is opposite to an existing or anticipated exposure in the physical market. For example, a farmer expecting to harvest wheat in three ________ _________ ___ ______ ______ _______ _____ _____ _____ ____ ____ _________.
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