Financial Derivatives – Start Trading Right Now!

14.03.2013

There are many people who have deep knowledge about the stock market and its working but they will definitely agree on a point that derivatives world is a different world that paves way for many new challenges and it teaches many ways for making money. Stock derivatives can be in different forms but it is essential that these derivatives will establish a contract between the stock holding party and the investor who shows his interest in buying that stock at some later date. Derivatives can be purchased with the help of brokerage firms or you can even create your own derivative too. It depends on you what do you want. When the question arises about how to trade the stock derivatives then you have to follow the certain set of instructions. These instructions can guide you in a better way and these are as follows:

  1. First of all you are required to open an account of investment with a firm (brokerage firm). You can open this account online or in your specific area, it depends on your accessibility and feasibility. You have to make some home work and research about the firm that is going to give you brokerage services, to make certain that whether it transacts in stock derivatives or not. This research will help you in avoiding any fraud.
  2. Whether you have to buy few or many stock derivatives, you have to get in touch with your firm for it. Do contact with the firm and inquire them if there is any feasibility of buying the derivatives in stock in which you feel your interest. Brokerage firms that do the activity of derivative trading that will definitely prepare a contract of derivatives by charging some fee.
  3. A variety of derivatives are found in the markets that one can obtain like futures, warrants, and options etc. Stock option actually provides a right to an investor to buy some certain stock share at some future date on the striking price. Even they can agree to buy at the price that existed on the point of the option purchased. Warrant is alike option but it is sold directly. A future may demand the stock purchase in some future time but it is obligatory for the buyer to purchase the share. A forward stock is also similar to future derivatives but it confines the future trading to cash and stock only.
  4. You can sell the derivative contract for stock to the interested investor through brokerage firm. It often happens that selling a derivatives is much easy than short selling the stocks. This is a written contract and it is not bound with the stocks at all.
  5. You can sell your derivative stock just penning a call that you already have on stock. When you write a call then you automatically enter into a contract with an investor so that your shares at the striking price can be sold in future. Calls can be covered or uncovered. You must chat about the options with the firm before writing a call and they will charge fee for making your transaction complete.

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