Speculator

A speculator is a futures market participant who takes on price risk in pursuit of profit, without an underlying physical position to hedge.

Speculators take on the price risk that hedgers want to shed. A grain elevator that has bought wheat from farmers and sold it forward has no appetite for further price risk; a fund or individual trader willing to bet on where the price is headed fills that gap by taking the other side of the contract. Without speculators, hedgers would often struggle to find a counterparty at a fair price, and futures contracts would be far less liquid.

Speculators range from large institutional funds tracking a commodity index to individual traders betting on a single crop report. They hold no physical commodity and have no intention of making or taking delivery; nearly all close their positions before expiry. Regulators track how much of the open interest in a market is held by speculators versus hedgers. See who trades commodities.