What are 'speculative limits' in futures trading?

Speculative limits in futures trading refer to caps imposed on the number of contracts that a trader can hold or control. These limits are designed to prevent excessive speculation that could lead to market manipulation or instability. By placing a maximum on how many contracts can be held, exchanges aim to ensure that no single trader or group of traders can dominate the market, which helps maintain fair and orderly trading conditions.

These limits are especially relevant for large traders who might significantly influence market prices if left unchecked. The regulation is intended to promote a balanced market where risks are more evenly distributed across participants. Understanding speculative limits is crucial for traders as it affects their trading strategy, risk management, and overall participation in futures markets.

The other options do not accurately describe speculative limits: minimum investment amounts pertain to the entry cost of trading, maximum profit limits do not exist in the same context, and restrictions during high volatility are more related to trading halts or circuit breakers than to speculative limits.