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Trader A and Trader B enter different types of contracts at time 0, both types of contracts have the same underlying asset and the same
Trader A and Trader B enter different types of contracts at time 0, both types of contracts have the same underlying asset and the same maturity date. The following graph shows the profits on the contracts at the maturity date (in one year's time).
Use this profits graph to answer the following questions
- If both traders are hedgers, what are their expectations of the asset price movement?
- If both traders are speculators, what are their expectations of the asset price movement?(No explanation is required.)
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