speculation

Examples of speculation in the following topics:

• Commodities and Other Futures

  • Commodities traders fall into two broad categories: hedgers and speculators.
  • Thousands of individuals, willing to absorb that risk, trade in commodity futures as speculators.
  • Speculating in commodity futures is not for people who are averse to risk.
  • Commodity futures are a form of "derivative" -- complex instruments for financial speculation linked to underlying assets.

• Economic Booms and Busts

  • The Market Revolution produced an upsurge in speculative investments, which resulted in periods of economic boom and bust.
  • These speculative investments were frequently made with borrowed funds, resulting in large-scale cycles of boom and bust in the early 1800s.
  • The tremendous growth in the agricultural sector in the late 18th and early 19th centuries encouraged land speculation, or the purchasing of land with the expectation that its value would continue to increase.
  • In 1837, the nation once again faced a financial crisis as a result of the speculative fever of the Market Revolution, known as the Panic of 1837.

• Forward and Spot Transactions

  • Finally, we distinguish the role between hedging and speculation.
  • Investors use two strategies to invest in the financial markets: Speculation and hedging.
  • Speculators search for quick profits and are gamblers.
  • As you guessed, a speculator can gain or lose massive amounts of money from the derivatives market.
  • Speculators are vital to the market because their presence increases the liquidity of the securities.

• Evolution of Viruses

  • The evolution of viruses is speculative as they do not fossilize; biochemical and genetic information is used to create virus histories.
  • However, viruses do not fossilize, so researchers must conjecture by investigating how today's viruses evolve and by using biochemical and genetic information to create speculative virus histories.

• The Panic of 1837

  • The financial crisis of 1837 was based on speculative fever and contributed to a five-year economic depression.
  • The Panic of 1837 was a financial crisis, or market correction, driven by speculative fever.
  • These speculative investments were frequently made with borrowed funds, resulting in large-scale cycles of boom and bust in the early 1800s.
  • The tremendous growth in the agricultural sector in the late eighteenth and early nineteenth centuries encouraged land speculation, or the purchasing of land with the expectation that its value would continue to increase.
  • However, Jacksonian Democrats argued that the Bank had funded rampant speculation and introduced paper-money inflation, and was therefore chiefly responsible for the crisis.

• How Stock Prices Are Determined

  • Speculators often add to this upward pressure by purchasing shares in the expectation they will be able to sell them later to other buyers at even higher prices.
  • When speculative fever can no longer be sustained, prices start to fall.

• Market Strategies

  • It gives speculators -- traders willing to gamble on high-risk situations -- a chance to buy more shares.
  • If their investment decisions are correct, speculators can make a greater profit, but if they are misjudge the market, they can suffer bigger losses.
  • If it sees a need to curb speculative enthusiasm, it sets high margins.
  • Another group of speculators are known as "short sellers. " They expect the price of a particular stock to fall, so they sell shares borrowed from their broker, hoping to profit by replacing the stocks later with shares purchased on the open market at a lower price.

• Wall Street Crash of 1929

  • Many Americans engaged in speculation before the crash, investing heavily as shares steadily rose until an unstable bubble had formed.
  • The crash followed a speculative boom that had taken hold in the late 1920s, which had led hundreds of thousands of Americans to invest heavily in the stock market.
  • Speculation thus fueled further rises and created an economic bubble.

• Futures and Forward Contracts

  • Speculators buy derivatives because the market value of the derivatives could experience wide swings.
  • If a speculator bought 10 contracts, subsequently, he or she would earn a $150,000 loss if the contracts matured today.
  • Thus, speculators could earn enormous profits or experience massive losses from the derivatives markets.
  • For this case, a speculator could earn a profit of a half-million U.S. dollars if the futures contract matured today.
  • Speculator buys 3 million ringgits for $1 million and sells them for $1.5 million.

• Special Derivatives

  • As profits were soaring, the top management at Barings let Nick Leeson continue his speculation.
  • Leeson speculated the stock prices would increase and bought futures contracts to protect his position.
  • Thus, investors are likely to purchase CDSs for speculative grade bonds or debt.
  • During good times, AAA rated companies have a zero default rate while speculative grade bonds have a default rating less than 4%.
  • Therefore, speculators can enter the market and gamble on outcomes.