What Is the Primary Difference between Hedging and Speculation with Derivatives?

Hedging is the use of derivatives to reduce or offset existing financial risk. A hedger already has an exposure (e.g. owning a token) and uses a derivative (e.g. a put option) to protect against a potential loss.

Speculation, conversely, is the use of derivatives to take on risk in anticipation of a profit from a future price movement. A speculator does not have an existing exposure but is betting on the market's direction.

Hedging aims to minimize loss; speculation aims to maximize profit.