Explain speculation?
Answers
Explanation:
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Answer:
A speculator is any entity or individual that attempts to make opportunity profit from changes in the prices of financial instruments over the short time.
There are 4 types of speculators.
(a) Bull
A bull is a type of speculator who anticipates a rise in the price of securities. This type of speculator buys financial securities, so that he/she can sell them in the future at a higher price. When the price of security increases, he/she gains profit whereas when the price of security decreases, he/she loses.
(b) Bear
A bear is a speculator who anticipates a fall in the price of security. This type of speculator borrows securities in order to sell them to an available buyer with the intention of buying them back at a lower price. This speculator can benefit from the fall in the price of the securities.
(c) Stag
A stag is a type of speculator that applies for new shares of the company with the view of selling them at a premium after allotment.
(d) Lame Duck
It is a speculator who is in or near bankruptcy due to bank trades. A lame duck is a type of speculator who suffers multiple losses.