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Tagged: Need of Derivatives
Why should a trader need the futures/call/put?
Futures and options have a unique feature that make them a more attractive instrument from a trading perspective than stocks and bonds, that is high leverage. Leverage is a measure of the worth or value of an instrument relative to the money required to buy/sell the investment. Also the trader use the futures and options to hedge their portfolio.
Futures/ call/put are required for traders to customize the trading. In the derivative market, the entire stock price is not required and only margin needs to be paid. And derivative markets reflects the price fluctuation on daily basis but in equity market, it can be realized only when the stocks are sold. Here, the percentage of Profit/Loss is much higher compared to Equity market.
In all these Futures,Call as well as Put options, there is no direct intervention of exact amount and here only the difference is exchanged between the parties.
Actually it encourages the people to trade.
Futures/Call/Put are all options for a trader to make a deal happen during the current time and make the settlement in a future date. Also there is minimal payment like margin/premium that is required during the time of deal. So in a derivative market a trader needs futures/call/put, it encourages traders to trade. Most of the times if done with proper analysis the risk is minimal.
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