There are many different kinds of derivatives. We can only give you a general introduction here. We also include a jargonbuster to explain all those strange terms.
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There are many different kinds of derivatives. We can only give you a general introduction here.
Let’s look first at the definition of a derivative:
A derivative is a financial instrument that "derives" its value from the intrinsic value and/or change in value of an underlying asset.
Examples of derivative trading instruments are - CFDs, call options, put options, interest rate swaps, futures contracts, etc.
In general, derivatives are used by sophisticated investors to maximize cash returns and/or minimise negative exposure to uncertain price movements in the underlying asset.
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