Financial derivatives are also known as common derivatives. In simple words, they are contractual agreements, where the value of the contract is consented upon by the agreeing parties based on the value of an underlying asset.
Throughout the world, different
derivatives are frequently traded, which indicates that derivatives market is
vast; roughly estimated to be about $690 trillion. (Source: Bank for International Settlements)
One of the reason behind the vast size of derivatives market is the availability of derivatives for different asset classes including bonds, stocks, commodities, currencies, etc. Let’s understand more about Financial Derivatives with this post.
Types of Derivatives
There are different types of derivatives
offered either OTC (Over-the-counter) or via an Exchange. However, the value of
these derivatives is largely affected by the value of the underlying asset.
The most popular derivatives used in online trading are: -
§ Futures - This is the most common form of derivatives, and is based on an agreement to buy or sell assets.
§ Options - This allows traders to have a choice to buy or sell an underlying asset at a specified price.
§ Swaps - A common derivative utilized by the parties to exchange cash flows for a specific amount of time based on the underlying asset.
Why Trade Financial Derivatives?
Derivatives are primarily used for hedging or speculation. The hedging activity makes them a great tool for risk management. This protects investors and businesses from unfavorable price movements in the future. However, to implement hedging using derivatives accurately, you need the right exposure and the experience to ascertain the quality and quantity of the underlying asset.
To reduce the risks and to help you enter the global markets with confidence, Futures First Academy has brought the experience and exposure of the seasoned market experts, through their derivatives trading courses, where you don’t just get the information in abundance, but you also get the live practical sessions.
This is one of the finest finance courses, where you can learn the various types of derivatives and their benefits. Also, if you are a working professional, then we offer online courses as well as a flexible schedule of classroom courses to fit your calendar and help you learn the trading principles.
Reach us to know more.