Derivative Segment Trading

 

Derivative trading can be done in four different ways - Future, Forward, Options and Swaps. In derivative you actually buy a contract that expires within a stipulated time frame. Usually all the derivative contracts in a specific stock market expires on a particular day of every month.

You have to close the deal either by selling or buying the stocks within that stipulated time. In derivative trading the stocks are bought and sold in lot.

The number of stocks in a lot varies from one stock to the other and the price of the lot is derived by multiplying the number of the stock with the current price of that stock in that market.

The biggest advantage of derivative trading is that you can get the lot by investing only the 30 to 40% of the actual price of the stocks that you will be holding. [Via]

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