Mumbai,
Maharastra India.
A derivative is a contract or product that derives its value from an underlying asset. Derivatives can include a wide range of such assets including indices, currencies, exchange rates, commodities, stocks or the rate of interest. The buyer and seller of such contracts have opposite estimations of the future trading price. Both the parties bet on the future value of the underlying assets to make a profit.
Derivative trading is similar to a regular buy and sell process. But instead of paying the whole amount up front, a trader pays only an initial margin to a stockbroker.
Depending upon the conditions of a contract, derivatives can be of the following types –
There are four participants involved in derivative trading. They are as follows
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