Learn Derivatives: Futures, Options, Warrants & CFDs
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- Derivatives
A derivative is a financial instrument that is based on another security. One such example is options. If the buying and selling of stock shares were non-existent, no options would trade either since these are based on shares.
Examples of Derivatives:
- Options
- Warrants
- Futures
- Contracts For Difference (CFD’s)
There are many advantages to purchasing derivatives, some of which include:
- Increased leverage
- Ability to lessen risk
- Opportunity to trade a very short term window
It is important to understand the difference between derivative types. For instance, while options and warrants may seem identical at first glance, one is offered publicly and the other privately. One type an investor can write while the other can only be sold by the company; one is dilutive which requires the creation of additional shares while the other is based on existing shares. Then there are futures and contract for difference (CFDs), which is slightly different again. The point is: you need to learn about derivates and their individual differences before investing in them.
The following section of derivatives will provide a wealth of information not only on what each type is, but will reveal the inner workings of the derivative type. With this section you will be able to dissect each derivative according to its risk and reward, the objectives of each, and if it fits your investment style. Derivatives are quickly becoming the new way to turn small speculative capital into a healthy sum, and this section will explain how.
24 Derivatives Academy/articles
- Options
- Options Trading: Call Options Explained
Call Options Explained with example. Call gives you the right to buy a stock, but you are not obligated to do so. The contract is worth a certain amount of money which we will call extrinsic value.
- Options Trading: Put Options Explained
Put options are purchased when you feel the market is going to cool off. Let us go back to our real estate example that we started in part 1 to explain how a Put options contract works.
- Options Trading: Why Trade Options?
With so many different products on the market, why choose options? Here are a few compelling reasons: leverage, passive Income, risk management, diversification, small capital outlay
- Components of an Option
Learn about the components of an option. What are Underlying Asset, size of contract, expiration date, exercise price
- Understanding Option Pricing Fundamentals
Learn the fundamentals of options pricing. It is important that we clearly understand what factors go into an options premium or value. What is intrinsic value or time value?
- Options Trading Examples
We will now walk through an actual example of trading a call option and a put option. Going through will give us exposure to how a trade really works, and the profit versus risk of each
- Options Trading Strategies
Learn options trading strategies; covered call strategy to earn income, hedge to protect shares and use it to leverage
- Options Trading Risks
All investments carry risk. Although the risks are somewhat low in this example, the rewards are likewise comparative. What sorts of risks are associated with options trading?
- The Covered Call Strategy
The Covered Call Strategy is a simple and effective way to make money in the stock market that reduces current risk to share holders. It is straight-forward and lucrative for anyone who trades shares.
- Trading Options Seminars: What You Will Learn in a Teaser Seminar
Some may choose to buy a book and others prefer the person to person contact that can be had at an options trading seminar. What really takes place behind the closed doors of these elite training sessions?
- CFDs