What is the difference between hedging and speculating in the futures market?
Hedging is the process of transferring the price risk of a product, commodity, or resource to another party. Speculation is the assumption of risk for the express purpose of making a profit. The margin requirement of a hedge account is generally less than that of a speculative account. This is because hedgers have an interest in the underlying commodity, either for purchase or sale. Hedge trading accounts are generally less active than speculative accounts (e.g. day traders).
