shares and stock

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CA.Sonia

CA.Sonia (Querist)
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03 September 2009 can anybody tell me the difference between speculator , arbitrageur , hedging.

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
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03 September 2009 difference between hedging and speculation.

Hedging >>>>>>>

Used to reduce risk and manage margins
Reduces the fluctuations in propane prices for retailers and end users
Used to "back to back" sales to residential/commercial customers at a fixed profit margin
An important part of managing and growing your retail propane company

Speculation >>>>>>>

"Betting" the market will move in one direction
Retailers buy product on a fixed price but charge market-based prices to their consumers
Speculation increases risk and creates uncertainty on retail margins
Can literally put you out of business

Arbitrage >>>>>>>>>

Arbitrage is the practice of taking advantage of a price differential between two or more markets.