Now a days, new trader’s think that future and option is instruments where they can easily make money in a very short term. But in Reality, it very hard to make money in future and option segment if you don’t have proper knowledge about future and option. If you want to expert in future and option segment, you should clear your view in market and know all the strategies which we implement in stock market to control risk in stock market.

VISMINIDA, trained our students how to control emotion in stock market, how to use strategies in different situation to control risk in stock market specially in future and option segment.

We will Cover the following topics in Advance Derivative Analysis.

What is Derivative (Future and Option)

 

Future and option are derivative products in the stock market. When two parties make a financial contract, where they agree to buy or sell the underlying asset at a agreed price on a specific date (Expiry Date). The reason for making this contract to hedge the risk involve in the stock market.

Uses of Derivatives

Uses of Derivatives include:

• Generating option ability
• Providing leverage facilities
• Hedging risks in the underlying
• Obtaining exposure for the underlying assets
• Switching asset allocations between the different classes of assets
• Speculation and generating profits

Underlying in Derivatives

 

• Stocks/ Shares/ Equity: A share is an indivisible unit of capital that expresses the ownership relationship between the shareholder and the company.
• Currency: It is a medium of exchange for goods and/ or services. It is the money in the form of coins or paper notes which is usually issued by the government and generally accepted at its face value.
• Commodity: It is a basic interchangeable good which can be used with other goods of the same type.
• Interest Rate: It is the amount of interest due per period, as a percentage of the lent, deposited, or borrowed amount, also called the principal amount.

Advantages of Derivatives

Non-binding Contracts

When an investor invests in the derivative contracts in the open market, it is considered that he is purchasing the right to perform it. However, there is no obligation on him to perform its option. Therefore, there is an advantage of non-binding contracts and it offers a good deal of flexibility in performing the investment strategy.

Leverage Returns

Investors become capable of making extreme returns that may not be possible with primary investment instruments like stocks and bonds. Unlike stocks, when investors invest in the derivative markets, it does not take a long period of time to double the money.