Explain the difference between hedging and speculating

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Due on 05 Dec, 2016 12:00:00
Asked On 05 Dec, 2016 07:47:47
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Jar71820
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Thread: Discuss the following question: Commercials suggesting that “buying gold” would be a wise decision are commonly aired. Explain the difference between “hedging” and “speculating” by explaining why someone who wishes to “hedge” against inflation might choose to purchase gold. Explain why someone who wishes to “speculate” might also choose to purchase gold. Relate the motivations of “hedging” and “speculating” to the topic of Christianity. You must submit 1 thread of at least 250 words and cite at least 1 source in addition to any Scripture verses cited.

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Submitted On 05 Dec, 2016 08:01:56

Answer posted by

Geoffreysmith
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Hedging involves taking an offsetting position in a derivative in order to balance any gains and losses to the underlying asset. Hedging attempts to eliminate the volatility associated with the price of an asset by taking offsetting positions contrary to what the investor currently has. The main purpose of speculation, on the other hand, is to profit from betting on the direction in which an asset will be moving. Hedgers reduce their risk by taking an opposite position in the market to what they are trying to hedge. The ideal situ...

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