Option Market Participants

Question

Option Market Participants

On the basis of their risk appetite and trading apprroach, participants in Options market can be categorized into- Hedgers, Speculators and arbitrageurs.

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Answer 1 · 2018-05-30

The Options market has following categories of participants:

HEDGERS: Traders who are currently holding the underlying asset like stocks, commodities, and currency etc., of an Option and are participating in the market to manage price risks of their underlying are called Hedgers. They trade in Options to offset any losses which may arise due to downward movement in the price of the underlying asset they are currently holding.
SPECULATORS: Traders who wish to make a profit by taking a view on the future direction of the price movement of an underlying asset. Depending on whether the market will be bullish, neutral or bearish, these traders take positions in the Options markets.
ARBITRAGEURS: Traders who trade in options to earn a riskless profit. They take multiple positions in the market so as to create a riskless scenario and earn a small profit from it.

Option Market Participants

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