What are the different types of financial derivatives?
Financial derivatives are investment tools that allow the investor to benefit from the movement of specific security prices without acquiring security ownership immediately. In this way, the investor can engage in safety at less costs that would be worth buying. The two most common types of financial derivatives are options that allow the investor the opportunity to buy or sell basic security and futures that undertake the holders of the contract to buy basic security. Derivatives also differ in terms of types of securities that may include stocks, bonds, commodities and foreign currencies that are the basis of contracts. However, such an investment can often take a long time to take place, which means that the assets and liquidity of the investor may not be immediately affected. Financial derivatives of providing opportunities for investors to be exposed to such events and other expensive assets for a fraction of the price and much greater flexibility. Contracts are called derivatives because they obtain their value from the performance of these foundationsthe assets.
Possibilities are among the most popular of all financial derivatives, especially because many employers offer employers of stock options. The basic stock agreement gives the owner the right to purchase, with the possibility of calling, or sell, with the possibility of put, 100 shares of shares for a price known as a strike price. If the buyer has to pay the price for ownership of the contract can predict the transfer of shares, can benefit from the difference between the strike price and the possible price of the shares.
Futures are financial derivatives similar to that one party can buy some basic asset for some in the future at a predetermined price. However, it differs from the possibilities that the buyer must purchase a basic asset at that time and the price set in the contract. There is no premium for the futures contract itself, which also differs from the options agreement.
It is important to realize thatShares are not the only basic asset used in financial derivatives. Almost anything that has some value that can increase or reduce in the derivative over time. For example, commodities such as gold or silver are often the basis of futures contracts. Foreign currencies that can increase or reduce value compared to them are also popular assets used by investors in futures agreements.