Who Invests In and Trades Rough Rice Futures?
Rough rice futures offer market participants a way to hedge their risk and gain control over their rough rice investments. Producers and Marketers of rough rice can minimize the risk of price fluctuations in the rough rice market by using a short hedge, which locks in a fixed selling price for the rough rice that they produce. Thus futures allow them to get the specified amount in the contract, even if prices fall in the future. Consumers of rough rice can use a long hedge to set a fixed purchase price for a specified quantity of rough rice as per their need.
Rough rice futures are also traded by speculators. Speculators have no vested interest in the underlying asset, that is, they will neither deliver rough rice nor take delivery for rough rice. They trade in and out of rough rice futures only based on speculations about the price fluctuations of rough rice over the trading period. They take on the price risk that hedgers are trying to avoid, because they hope to profit from the price movements. Rough rice speculators buy rough rice futures if they believe that the price of rough rice will go up, and sell rough rice futures if they believe that the price of rough rice will go down.