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Trades (Over-The-Counter (What? (Trade directly without intermediary.…

- - - - Traded Derivatives
        
        Type
        
        Forwards
        
        Contract where buyer is obliged to buy one or more assets at a pre-determined price and date.
        
        Value
        
        Difference market value of underlying asset and contract's price
- - - - Trading derivatives
        
        Type
        
        Futures
        
        What?
        
        Contract where buyer is obliged to sell one or more assets at a pre-determined price and date.
      - Benefits
        
        Trade with exchange. Always find match.
    - - Transactions visible
- - - - Gives buyer right but not obligation to buy (call) or sell (put) one or more assets at a pre-determined price (strike price) on one or more future dates (exercise date).
        
        Buyer pays seller a option premium to get option.
        
        Don't use Option before pre-determined date (expiration date)?
        
        Option useless.
      - Benefits
        
        Felixble
        
        Safe. Exercise right or not.
      - Uses
        
        Hedge risk
        
        E.g., shares might fall and you can sell for higher price according to option.
      - Call Option = Right to buy
        
        Long
        
        Bought right to buy/Bought option.
        
        Short
        
        Sold right to buy/Sold option.
      - Put Option = Right to sell
        
        Long
        
        Bought right to sell/Bought option.
        
        Short
        
        Sold right to sell/Sold option.
- - - - Bets on other financial instruments (underlying).
      - Buy = Long; Bullish
        
        Agree to buy asset.
      - Sell = Short; Bearish
        
        Agree to sell asset.