Types of Speculators

Types of Speculators

Traders engaged in speculative activity in the stock market are described by different names based on the type of activity they generally engage in. The prominent among them are hulls, bears, stag and lame duck.

Bull

A trader who expects a rise in prices of securities is known as a bull. He, therefore, takes a long position with respect to securities. He engages in long buy anticipating a rise in prices of securities. The bulls will be able to make profit only if the prices rise as anticipated; otherwise they will suffer losses. When there is an overbought condition in the market, that is, the purchases made by speculators exceed the sales made by them; the bulls begin to spread good rumours about companies so as to raise the price of their shares. This activity is called a bull campaign.

When the prices of securities are generally rising in the market, resulting in buoyancy and optimism in the stock market, the market is said to be in a bullish phase.

Bear

A bear is a pessimist who expects a decline in the prices of securities. He, therefore, takes a ‘short position’ on securities by engaging in short sales. He attempts to cover up his short position by buying the securities at lower prices when prices decline. He may engage in a bear raid so as to bring down the prices of securities. Spreading unfavourable rumours about companies with the intention of creating a decline in their share prices is known as a bear raid. The bear will suffer a loss if the prices of securities rise after he takes a short position on securities. When there is a general decline in prices of securities in the stock market, the market is said to be bearish.

Lame Duck

A lame duck is a bear who has made a short sale but is unable to meet his commitment to deliver the securities sold by him on account of rise in prices of securities subsequent to the short sale. He is said to be struggling like a lame duck.

Stag

A stag is a trader who applies for shares in the new issues market just like a genuine investor. A stag is an optimist like the bull and expects a rise in the prices of securities that he has applied for. He anticipates that when the new shares are listed in the stock exchange for trading, they would be quoted at a premium, that is, above their issue price. As soon as the stag receives the allotment of shares, he would sell them at the stock exchange at the higher price and make a profit. A stag is said to be a premium hunter. The stag will, however, suffer a loss if prices of the new shares do not rise as anticipated when they are listed for trading.