Derivatives Trading

Derivatives trading involves financial contracts whose value is based on the price of an underlying asset, like stocks, bonds, or commodities. Common types of derivatives include options and futures. Investors use derivatives to hedge against risks or to speculate on future price movements. For example, a farmer might use futures to lock in the price of their crop before harvest, while an investor may purchase options to profit from anticipated market changes. While derivatives can enhance profits, they also carry higher risks, making them suitable for experienced investors who understand the potential for both gains and losses.