Which strategy would typically involve speculation on future commodity prices?

• A. Hedging against losses
• B. Investing in bonds
• C. Speculative trading
• D. Maintaining a cash reserve

Answer: (C)

The strategy that typically involves speculation on future commodity prices is speculative trading. Speculative trading focuses on buying and selling commodities with the intent of profiting from fluctuations in market prices over time. Traders engage in speculation by analyzing market trends, news, and other factors that may influence commodity prices, aiming to predict and take advantage of price movements.

In contrast, hedging against losses is primarily a risk management strategy designed to protect against potential price declines rather than to profit from price changes. Investing in bonds involves allocating funds to fixed-income securities, which does not relate to direct speculation on commodity prices. Maintaining a cash reserve is a liquidity strategy that ensures funds are available for potential opportunities or emergencies but does not directly engage with the speculative aspects of commodity trading. Each of these alternatives focuses on different financial objectives and strategies that do not center on the anticipation of price movements in the commodity markets like speculative trading does.