Reasons to Invest in Derivatives

BUSINESS

Reasons to Invest

LegacyFX Introduction

IN DERIVATIVES

REASONS TO INVEST IN DERIVATIVES Derivatives are a category of securities in which the basic term structure, risk and pricing are dictated by the underlying asset. Traders use derivatives to hedge against risk, speculate on price movements without purchasing assets, or to increase their leverage.

Hedging Hedging is a financial tool used by investors to protect themselves from large losses. When an investor uses a derivative to hedge, they can protect their portfolio by buying a put option.

This means they lose less money or even gain a small amount if the value of the stock falls, as well as profiting from a rise in value.

Speculating Derivatives allow for speculation on price movements within the markets without the investor having to purchase the underlying asset. Investors can make predictions

In an exchange, currencies are bought and sold by multiple buyers and sellers, often placing offers simultaneously.

based on future price movements for the underlying asset and use leverage to do so at a lower cost.

Leveraging Leveraging through options allows investors in derivatives to take advantage of large price movements in volatile markets and maximise their gains without investing additional capital.

Futures contracts are a type of derivative used for speculation on future price movements.

Futures contracts are a type of derivative used for speculation on future price movements.

You can learn more about futures contracts by visiting the LegacyFX blog.