Future Contracts
Future Contracts Future Contracts Table of Contents What is a Future Contract? A futures contract is an agreement made through an organized exchange to buy or sell a fixed amount of a commodity or a financial asset on a future date at an agreed price. Simply, futures are standardized forward contracts that are traded on […]
Basics of Forwards Market
Basics of Forwards Market Basics of Forwards Market Table of Contents What is Forward Market? Forward markets world-wide are afflicted by several problems: Lack of centralization of trading Illiquidity Counter party risk Foreign Exchange Forwards Interbank forward foreign exchange markets are priced and executed as swaps. This means that currency A is purchased vs. currency […]
Benefits & Limitations of Derivative
Benefits & Limitations of Derivative Benefits & Limitations of Derivative Table of Contents Benefits of Derivatives Hedging risk exposure The value of the derivatives is linked to the value of the underlying asset, the contracts are primarily used for hedging risks. For example, an investor may purchase a derivative contract whose value moves in the […]
Short Put Synthetic Straddle
Short Put Synthetic Straddle Short Put Synthetic Straddle Table of Contents Basics Concepts – Short Put Synthetic Straddle Description – Short Put Synthetic Straddle The Short Put Synthetic Straddle involves selling puts and counteracting them with a Short Stock position. To create the Short Straddle shape, we have to sell twice the number of puts. […]
Participants of Derivative Market
Participant of Derivative Market Participant of Derivative Market Table of Contents Participants in Derivative Markets Hedger Hedging is an act, whereby an investor seeks to protect a position or anticipated position in the spot market. It is done by using an opposite position in derivatives. This means that if you have a buy position, you […]
Index Derivatives
Index Derivatives Index Derivatives Table of Contents Equity Index Derivatives Financial derivatives — such as futures or options — are a powerful technique through which hedging, speculation, investment and arbitrage takes place in a modern economy. The major products of the equity derivatives industry worldwide, is Index derivatives. Internationally, trading volume on index derivatives is […]
Short Call Synthetic Straddle
Short Call Synthetic Straddle Short Call Synthetic Straddle Table of Contents Basics Concepts–Short Call Synthetic Straddle Description–Short Call Synthetic Straddle The Short Call Synthetic Straddle involves selling calls and counteracting them with a long stock position. To create the short straddle shape, we have to sell twice the number of calls. So for every 100 […]
Types of Derivative Products
Types of Derivative Products Types of Derivative Products Table of Contents Derivative Products What is Forwards Contract? A forward contract is a customized contract between two parties, where settlement takes place on a specific date in future at a price agreed today.The main features of forward contracts are :– They are bilateral contracts and hence […]
Long Put Synthetic Straddle
Long Put Synthetic Straddle Long Put Synthetic Straddle Table of Contents Basics Concepts – Long Put Synthetic Straddle Description – Long Put Synthetic Straddle The Long Put Synthetic Straddle involves buying puts and counteracting them with a Long Stock position. To create the Straddle shape, we have to buy twice the number of puts. So […]
Origin of Derivatives
Origin of Derivatives Origin of Derivatives Table of Contents What is a Derivative? Derivatives are financial contracts whose value depends on an underlying asset or group of assets. The commonly used assets are stocks, bonds, currencies, commodities and market indices. the worth of the underlying assets keeps changing consistent with market conditions. Evolution of Derivative […]