The easiest way to explain a derivative is that it is a contractual agreement where a base value is agreed upon by means of an underlying asset, security or index. There are
many underlying assets that are contracted to various financial instruments such as stocks,currencies,commodities,bonds andinterest rates.
There are a number of common
derivatives which are frequently
traded all across the world. Futures and options are examples of
commonly traded derivatives. However, they are not the only types, and there are many other ones.
The derivatives market is extremely large.In fact, it is estimated to be roughly $1.2 quadrillion in size. The reason why it is so large is that there are derivatives available for many different assets including bonds
stocks, commodities, currencies, etc. Many investors prefer to buy derivatives rather than buying the underlying asset
The derivatives market is divided into
two categories: OTC derivatives and
exchange-based derivatives. OTC, or
over-the-counter derivatives, are derivatives that are not listed on exchanges and are traded directly between parties. These types are very popular amongst investment
Exchange-based derivatives are ones that are listed on exchanges, such as The Chicago Mercantile Exchange. It is common for large institutional investors to use OTC derivatives
and for smaller individual investors to use exchange-based derivatives for trades Clients, such as commercial banks, hedge funds, and
government-sponsored enterprises frequently buy OTC derivatives
from investment banks.
There are a number of financial
derivatives that are offered either OTC
(Over-the-counter) or via an Exchange
Derivatives values are affected by the
performance of the underlying asset or, as mentioned, the contract.
The more common derivatives used in online trading are:
CFDs are highly popular among derivative trading, CFDs enable you to speculate on the increase or decrease in prices of global instruments that include shares currencies, indices and commodities. CFDS are traded with an instrument that will mirror the movements of the underlying
asset, where profits or losses are released as the asset moves in relation to the position the trader has taken
Common derivatives based on an
agreement to buy or sell assets such
as commodities like sugar or shares paid for at a later stage but with a set price. Futures are standardized to facilitate trading on the futures exchange where the detail of the
underlying asset is dependent on the quality and quantity of the commodity
Trading options on the derivatives markets gives traders the right to buy (CALL) or sell (PUT) an underlying asset at a specified price, on or before a certain date with no obligations this being the main difference between options and futures trading.Essentially options are very similar to futures contracts. However options are
more flexible. This makes it preferable for many traders and investors.
For a single individual like you in order to participate in the global decentralized foreign exchange market you need a broker simply because the market involve major players like big banks i.e Goldman Sachs, Governments, big institutions and hedge funds who always transact on billion of dollars and perday over 7 trillion dollars is transacted in a foreign exchange market. I will share with you some of the reliable brokers for CFDs, in future I will update the thread and share reliable brokers for future and option trading too. I will keep it simple I can't explain everything on this thread, click the link below to join the thread for more 👇👇👇
The following belowe are some of the reliable brokers for trading CFDs
This is one of the best STP broker I use, you will.get access to HF spark card when you apply for, Which will act as MasterCard for withdraws at any ATm in the world that offer union pay, if you in any part of the world use this