WHAT IS Spice Trader
Spice trader is a slang term used to describe an investor who tends to trade in high-risk investment vehicles or markets. Spice traders prefer to invest in riskier endeavors and seek higher risk premiums for the risk that they take on.
BREAKING DOWN Spice Trader
A spice trader can invest in any number of investment vehicles or markets. A spice trader may take on investing in emerging or frontier markets, junk bonds, exotic options, and derivatives and stocks traded on the pink sheet, as examples of high-risk investment vehicles. The primary motive for a spice trader is to increase returns by investing in high-risk, highly speculative assets or debentures or markets. As a result, spice traders are able to demand a greater premium for the increased risk that they take on.
Spice trader is a double pun when used as a phrase used to describe investors. One pun is on the meaning of spice as something exotic, intense and stimulating to the senses. An investor who invests in risky investment vehicles is doing something out of the ordinary and exotic, and these trades require more intense focus that do more predictable trades because of the volatility of the instruments being traded. The second pun is on the actual term spice trader, which refers to people who actively traded actual spices. In this sense, modern investing spice traders are trading risky investments solely for the financial gain, not because they have an ideological interest in the investment vehicles, and they may be backed by silent investors who do not want the risk of doing the actual trading but would like to share in the profits.
Parallels Between Original and Investor Spice Traders
An original spice trader had access to a sailing ship and enough capital to sail to areas where spices were grown and produced, such as India, Madagascar and China, to purchase these spices and bring them back to Europe to sell to companies that would sell them to consumers. Spice traders were often backed by wealthy investors who did not have access to shipping vessels and had no desire to take the risks or experience the exertion and discomfort of sailing and trading with foreign producers. In this sense, spice traders were mercenaries, acting on the orders of others, without ideological investment in bringing spices to European consumers. Spices could be easily ruined by water or exposure to excess sun, or if delays brought them to consumers after a delay that affected the potency of the spices. Spice trading was risky not only for the physical dangers of making the journey to spice-producing regions, but also because the spices themselves were fragile and volatile, and their popularity was influenced by fashion and culture the spice traders could not control.