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Trading: What are Derivatives?

Trading: What are Derivatives?

In short, derivatives are contracts where a buyer and a seller trade an underlying asset.


A derivative doesn't hold inherent value, instead it derives (hence the name) its value from the underlying asset.


Derivative is also a blanket term for financial instrument such as futures, perpetuals and options.


If you invest in, I don't know, Guinness beer derivatives (they don't exist, but they should), the value of your derivative will depend on the market value of a gallon of Guinness.


So yeah, it should be pretty high. In my book, at least.


 

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LeftFooted

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