Derivative Trading

Derivative trading involves buying and selling financial contracts whose value is based on an underlying asset, like stocks, commodities, or currencies. These contracts, called derivatives, allow traders to speculate on the future price movements or hedge against risk without owning the actual asset. Common derivatives include options and futures. They can amplify potential gains but also increase risk, as their value depends on the underlying asset's performance. Derivative trading is used by investors and institutions to manage risk, enhance returns, or speculate on market directions.