Derivative Investments

Derivative investments are financial contracts whose value is derived from the performance of an underlying asset, such as stocks, bonds, or commodities. Common types include options and futures. Investors use derivatives for various purposes: to hedge against risks, speculate on price movements, or increase leverage, allowing them to amplify potential gains (or losses). While they can offer flexibility and opportunities, derivatives also come with higher complexity and risk, making it crucial for investors to understand their mechanics before incorporating them into a portfolio.