Derivatives

Derivatives are securities whose gain depends on the underlying security.

Derivatives

Derivatives are options, futures or forwards. In addition, further derivatives are generally a combination of all three.

22. April 2024 by Click insider / Forex Trading

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There are many forms of derivatives, the most common are:

  • options
  • forwards
  • futures
  • + more less important derivatives

The easiest and by far the most common forms of derivatives, ie options, forwards and futures. The most common of these are options. Among the options is the particular options that are interesting.

In addition to the simplest derivatives, there are also a large number of other derivatives to create new investment products, but that said it is primarily options that have aroused our interest, because of the opportunities it provides to achieve relatively high returns in a very short time, and without the risk becomes intolerable.

Derivatives and Risk

Derivatives are often used as a way to limit risk. It therefore means that one can use for example options to limit risk if, for example, is heavily invested in a stock, you can buy options where the same stock is the underlying asset, and thus actually use the option as a form of limiting risk.

options is therefore an opportunity to limit the risk by purchasing shares (hedging), but if you trade options without being exposed to the underlying security, one can thus achieve a soaring profits.

Derivatives can be purchased without being exposed to the underlying security. The merchants options often do this, as it is an attractive and potentially very rewarding way to invest.

Off derivatives, there are few that are as interesting as options. Underlying a option can be anything from stocks, commodities, currencies and indices.

Derivatives are however also used outside the world of finance. In business and in business life is also used derivatives as a means to hedge against the unforeseen, or as a motivational tool to increase the performance of those receiving derivative.

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