Derivatives are those instruments of the financial market which derive their value from an underlying asset which can be indices, stocks, commodities, exchange rates, interest rates or currencies. Derivatives as financial instruments help the investors to make profit by betting on the future market value of the underlying asset.

The interesting fact here is that the stock value fluctuates as per the current market conditions. In the changing market scenario investors either make profits or incur losses. Derivatives come handy during this time. It acts as safety net and helps in making additional price by correctly guessing the prices of the assets in future. In India, the derivative market has gained significance after they were introduced in the year 2000.

For those who are new to the concept of derivatives, it may seem a little perplexing as how can an underlying asset be put in use for business. A derivative online course will help you understanding

  • The functioning of the derivative market
  • Learn in detail the different types of derivative instruments.
  • Decode the strategies involved in the options contract
  • Advantages and disadvantages involved in the derivatives market.
  • Get a hold of the terminologies that will be used while dealing with derivatives.

1

The participants in the derivative market play an important role in determining the market situations. Based on their trading interests the participants of the derivative market can be divided into four broad categories.

  • Hedgers: Hedgers are the participants in the financial market who protects themselves from the risk of price movements. The hedgers try to hedge the price of the asset by opting for an opposite trade in the market of derivatives, hence passing on the risk to those who are willing to take it.
  • Speculators: Unlike hedgers, the speculators are willing to take risks in the hope of making higher returns. Hedgers are safe players. On the contrary speculators don’t hesitate to embrace risks and they believe on the concept of higher the risk, higher the return.
  • Margin traders: Only margin trading gives an extra leverage factor in the trading of derivatives. In margin trading, the person who is doing the trading need not pay the entire amount upfront, instead only a fraction of the total sum can be deposited. Hence, with the help of a small deposit, a large outstanding position is not difficult to maintain.
  • Arbitrageurs: The instruments in the derivative market are valued on the basis of the value of the underlying asset in the spot market. But there are times, when the price of the same stock in the cash market and the derivatives market differ. It is during these imperfections of price difference, the arbitrageurs take advantage to add profit in their kitty.

Derivatives training online courses give a detailed understanding of the derivatives markets such as derivative instruments, options, forward and futures, equities, asset backed and fixed income securities. The volume of derivative trading in the Indian market has grown manifold and it is never too late to start your own portfolio and earn profits from the market of underlying asset.

Leave a Reply

Your email address will not be published. Required fields are marked *