The derivative markets have a variety of participants, including:
1. Speculators: These participants aim to profit from price movements
in the underlying asset. They do not have an interest in the actual asset but
focus on the price movement of the asset.
2. Hedgers: These participants use derivatives to manage their risk
exposure to fluctuations in the underlying asset's price. For example, a farmer
might use futures contracts to hedge against a drop in the price of their
crops.
3. Arbitrageurs: These participants take advantage of price
discrepancies between related assets or markets by simultaneously buying and
selling them.
4. Market makers: These participants provide liquidity to the market
by quoting prices for derivatives and executing trades.
5. Traders: These participants buy and sell derivatives to make a
profit from short-term price movements.
6. Institutional investors: These are large investors, such as pension
funds, insurance companies, and mutual funds, who use derivatives to manage
risk and diversify their portfolios.
7. Retail investors: These are individual investors who trade
derivatives for speculative purposes or to hedge their risk exposure. Overall,
the derivative markets are made up of a diverse group of participants with
varying goals and strategies.
Overall, the derivative
markets are made up of a diverse group of participants with varying goals and
strategies.