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The factors that determine whether a buyet or a seller of a derivative security is a hedger or a speculator are risk parameters, economic conditions. and investment time horizons. Oftentimes, investors hedge while traders speculate. Hedgers are looking to diversify their risk and "Hedge'their portfolios for a given time, usually mid to long-term while traders speculate using higher leverage with more risk tied to it. Secondly, the current economic conditions play a big role in determining which kind of participant will engage as a hedger or speculator. For example, if rates are low and QE is in effect, there will be much more speculation rather than hedging since highly speculative assets typically rise during low rate/QE environments due to the ease of leading and such. Lastly, hedgers are often looking far into the future rather than a short period of time compared to speculators who tend to ride the wave of a short investment horizon/period. Although one can be both as well, for example, investors/traders can both hedge and speculate derivative securities with long and or short investment time horizons depending on the situation. This can be common amongst the largest investment banks, hedge funds. and family offices across the globe since the capital at risk is much larger so many different approaches can be engaged with ease. In conclusion. "Hedging attempts to eliminate the volatility associated with the price of an asset by taking offsetting positions in it - that is, contrary to what the investor currentiy 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