Why Is Liquidity Important for Speculators in the Derivatives Market?

Liquidity is crucial for speculators because they rely on the ability to enter and exit positions quickly and at favorable prices. High liquidity ensures that bid-ask spreads are tight, minimizing transaction costs.

It also guarantees that a large trade can be executed without significantly moving the market price. Without liquidity, a speculator might be unable to close a losing position or open a profitable one.