Investor Perceptions of Futures Trading as a Tool For Managing Volatility in Commodity Markets

Abstract

This study explores investor perceptions of futures trading as a tool for managing volatility in commodity markets. Through qualitative research, including interviews with investors and commodity traders, the study identifies key themes such as risk perception, the influence of market news and sentiment, and trust in futures markets as a volatility hedge. The findings reveal that while futures trading is widely viewed as an effective tool for risk management, emotional biases and market sentiment significantly influence investor decisions, especially during periods of heightened volatility. Experienced investors tend to trust futures as a hedge, while less experienced participants express doubts. The study highlights the need for better investor education on risk management strategies, as well as improved transparency and regulatory frameworks to ensure futures markets remain effective in mitigating volatility. The insights from this study offer practical recommendations for investors, market participants, and policymakers to enhance market stability and decision-making.