What are the benefits of trading in derivatives ?
Derivatives are very efficient risk management instruments and you can derive the below benefits: i. Hedging: You can protect your cash market investment and reduce potential losses in the same. ii. Speculation: You can speculate on the short term movement of the markets by using Futures and options. iii. Arbitrage: You can make profit by taking advantage of pricing difference between the cash and Derivatives market. iv. Leverage: You don’t have to pay the full traded value as it allows purchasing derivatives by just paying a % value of the traded value called the margin.
