Speculators in stock market



   A speculator is a person who trades derivatives, commodities, bonds, equities or currencies with a higher than average risk in return for a higher than average profit potential. Speculators take large risks, especially with respect to anticipating future price movements, in the hope of marking quick, large gains.

   The speculators are not genuine investors. Then buy securities with a hope to sell them in future at a profit. They are not interested in holding the securities for longer period. Their very object of buying the securities is to sell them and not to retain them. They are interested only in price differentials.

   In reality, there is not a hundred percent speculator or an investor. Each investor is to a certain extent a speculator. Similarly, every speculator to a certain extent is an investor. The difference between the two is a matter of degree only.


Kinds of speculators

The speculators are classified into four categories

1.   Bull
2.   Bear
3.   Stag
4.   Lame duck


1.   Bull



A bull is an optimistic speculator. He expects a rise in the price of the securities in which he deals. He enters into purchase transaction with a view to sell them at a profit in the future. If his expectation become a reality, he shall get the price difference without actually taking delivery of the securities.

In India, a bull is also known as Tejiwala. He is said to be a bull because just like a bull which tries to throw its victim up in the air, he expects to profit from increase in share prices.


2.   Bear

A bear is a pessimistic speculator who anticipates a fall in the prices of certain securities. He enters into selling contracts in certain securities on a future date. If the price of the security falls as he shall get the price difference.

A bear sells securities which he does not process with the hope. To buy the securities at a lower price before the date of delivery. In India, a bear is also known as mandiwala.


3.   Stag

Stag is slang team for a short-term speculator, equivalent to a day trader who attempts to profit from short term market movements by quickly moving in and out of positions. Day traders, or stags require lot of liquid capital to fund their positions, they may be attempting  to gain returns on very small price movements.

The stag is not interested in a bull run or a bear run. Its aim is to buy and sell the shares in very short intervals and make a profit from the fluctuation in share price movement.

Large institutions, rather than private investors, become stags or conduct strategies. To make profits from small short term price movement, Large blocks of stocks, normally during a company initial public offering (IPO), are purchased by stages. Large purchases during an IPO inflate prices in the near term and allow stags to sell the initial investment for a profit.



4.   Lame duck

When a bear is unable to meet his commitment immediately, he is said to be struggling like a lame duck. He is a bear who sells securities which he does not hold, with the expectation that prices are going to fall.

The intention of this type of speculator is buy them at a lower price later and profit from the difference. On the fixed date he may not be able to deliver the security as it may not be available in the market. The buyer may not be inclined to carry forward the transaction. The bear is said to be struggling like a lame duck.