Day Trading Derivatives

One of the most popular day trading instruments is a financial contract called Derivatives, which, by definition, derives its price from the price of the underlying asset. There are three main types of derivative products:

Option: A contract that gives you the option or right to buy or sell at any time at a fixed price for future dates. The call option is called a call option and the put option is called a put. So if you think the price of the asset rises, you will buy a phone or sell that asset (or even at the same time). If you think the price goes down, you will buy a bearish or sell a phone call.

Futures: A contract that gives you the obligation to buy something at a fixed price on a future day. These farmers are used to lock the price of their crops, so they have some protection against price volatility, and exporters or importers can reduce the risk of currency fluctuations by locking the exchange rate before importing or exporting. One interesting aspect here is that for commodities, farmers can theoretically deliver corn through physical delivery, but we obviously need cash to close the currency contract. However, in the real world, all transactions are settled in cash before the contract expires.

The above two derivatives are the most common, but the third derivative is also often used enough to be worth mentioning: stock warrants. These are issued by the company rather than the exchange and allow you to choose to buy more shares at a fixed price on a future date, much like the option.

The most important and largest option market in the United States is CBOE or the Chicago Board of Options, stock options trading. Other markets include CBOT (Chicago Stock Exchange) for corn, wheat, soybeans, etc., CME (Chicago Mercantile Exchange) for cattle, pork belly, NYBOT for coffee, sugar and cocoa (New York Trade Commission) New York Mercantile Exchange Metal and Oil

Disclaimer: The author provides information that he considers correct but does not guarantee accuracy To carry out their due diligence. This information should be used as a starting point for further inquiries and does not mean that it is simply a brief introduction