• Taking a position that involves risk with anticipation of profits. For instance, if I think interest rates will decline, I can buy long-term treasury bonds to monetize my view. This is speculation. If interest rate do fall as I expect, I can make a lot money. If I am wrong and the interest rates rise, I would lose money. The difference between gambling and speculation is that speculators usually have a mathematical expectation of positive profits.

 Embedded terms in definition
Interest rate
Treasury bond
 Referenced Terms
 Day trading: Refers to establishing and liquidating the same position or positions within one day's trading.Is the investment, Speculation or risk management approach which is limited to intraday activity with little or no overnight carrying of positions.Intraday trading in securities for profit as opposed to investing long-term for profit.

 Risk arbitrage: Is a form of trading whereby the risk arbitrageur attempts to profit from issues involved in merger/acquisitions. The underlying rationale is that the current price after the announcement is still below the bid price. Also, the company may find itself subject to other bids for its stock in excess of the initial announced bid. These price differentials are the arbitrage part. The risk is that other bids do not materialize or the initial announcement fails due to other considerations.Speculation on perceived mispriced securities, usually in connection with merger and acquisition deals. Mike Donatelli, John Demasi, Frank Cohane, and Scott Lewis are all hardcore arbs. They had a huge BT/MCI position in the summer of 1997, and came out smelling like roses.

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