11.10What is speculation?
1What is it?
Speculation is taking a position purely to profit from a predicted price move, accepting high risk.
2Why does it exist?
Speculators provide liquidity and take the risk hedgers want to offload. But speculation is not investing.
3Diagram
| Investing | Speculation | |
|---|---|---|
| Basis | Business value | Price prediction |
| Horizon | Years | Days/weeks |
| Leverage | Rare | Common |
| Outcome for most retail | Positive over long periods (historically) | Losses (SEBI studies) |
4Quick revision
- Betting on price moves.
- High risk, high leverage.
- Different from investing.
5Knowledge check
Q1. Is buying weekly options to "double money" investing or speculation?Show answer
Speculation.
Q2. What do speculators provide markets?Show answer
Liquidity and risk-bearing.
Q3. What did SEBI find about most retail F&O speculators?Show answer
About 9 in 10 lost money.