What is Derivatives?

A derivative is a financial security with the value that is reliant upon or derived from underlying assets. A derivative itself is a contract between two or more parties and the derivative price from fluctuation in the underlying assets.

The most common underlying assets for derivative are stocks, bonds, commodities, currencies, interest rate and market index. Derivative is normally traded on exchange. All this type of contract is standardized and are more heavily regulated.

The Bias of Derivative :

Derivative can be used for multiple purpose, hedge position, speculate on the directional movement of an underlying asset or give leverage to holding normally 3 types of derivative

  • Forwards — They are Similar to Futures but do not trade on an exchange only over the counter when a forward contract is created. The buyer and seller may have customized the terms size and settlement process for the derivative as otc product forward contract, it carry a greater degree of counter party risk for both buyer and seller

  • Futures — They are an agreement between two parties for the purchase and delivery of an assets at an agreed price at futures date. Future trade on an exchange, and the contracts are standardized. Traders will use a futures contract to hedge their risk or speculate on the price of an underlying asset. The parties involved in the futures transaction are obligated to fulfil a commitment to buy or sell the underlying asset.

  • Options — An options contracts are similar to a futures contract in that it’s an agreement between two parties to buy or sell an asset at predetermined futures date for specific price. He key difference between options and futures is that, with an option, the buyer is not obliged to exercise their agreement to buy or sell. It is an opportunity only, not an obligation—futures are obligations. As with futures, options may be used to hedge or speculate on the price of the underlying asset.

Below are the topics we get covered for Derivatives & Derivative Strategies, register now to get it started.

1. Derivative basic
2. Derivative advance
3. Call & put
4. Open interest
5. Changed in oi
6. Open low
7. Iv (Implied volatility)
8. India vix
9. Futures
10. Options
11. Bull spread
12. Bear spread
13. Protective put
14. Cover call
15. Call and put writing on based of
16. Live Derivative Training etc.
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