Exchange derivatives markets are virtual platforms where special contracts are traded - futures and options. These instruments are also called derivatives, or derivatives, because they come from some kind of asset.
For example, on the stock market, shares of a certain company are traded, and on the futures market, futures and options on these shares. Derivatives have a fixed maturity date. That is why the markets where they are traded are called derivatives. In terms of trading volume, derivatives markets have long outstripped the classic ones, since derivatives have significant advantages over stocks.
Shoulder effect
Derivatives - contracts with deferred payment. To buy a futures today, you do not need to pay its full price. When opening a position, the exchange will only block a certain amount on the trader's account - collateral. Its size depends on the instrument and the current market situation, but usually falls within 5–20% of the contract value. It turns out that a trader can operate with an amount several times greater than his own funds. That is, trading with leverage. For example, urgentThe Moscow Exchange market makes it possible to trade derivatives for blue chips with a leverage of 1:7. Futures on the RTS index are traded with a maximum leverage of 1:10, and contracts for currency pairs - 1:14.
Such a lending mechanism also exists in the stock market, but it is implemented at the expense of borrowed funds. Therefore, the broker sets its own conditions. Thus, the leverage, as a rule, does not exceed 1:2, and a fee is charged for providing such a loan. And the futures market allows the trader to use more "leverage" for free.
Wide selection of tools
Another global advantage of futures markets is a wide variety of instruments available for trading. The underlying asset of futures and options can be securities, currency pairs, stock indices, interest rates, volatility indicators (the rate of change in the price of an asset), commodities - metals, energy, agricultural products. Moreover, trading them does not imply the mandatory supply of an asset, for example, oil, currency or grain. Traders can open a position, take a profit (or take a loss) and make a reverse trade before the contract expires.
The Derivatives Market of the Moscow Exchange offers traders more than 60 trading instruments. True, most of them are not yet well promoted. But derivatives in Russia have a very short history, and probably their "golden age" is yet to come. Nevertheless, the Russian futures and options market is already almost 2 times higher than the stock market in terms of cash turnover.
Low fees
Small commission fees are another feature that distinguishes the derivatives market. The exchange and the broker charge a fixed fee for each contract bought or sold. First of all, this is relevant for traders who carry out many transactions during the trading session. When implementing such a strategy on shares, commission deductions take the lion's share of profits. Or significantly increase the loss. Whereas in many derivatives markets for transactions carried out within, lower exchange and brokerage commissions are set.
Limiting losses
In the spot market, bidders limit their risk per trade by placing stop orders. However, due to price slippage during strong movements, as well as for technical reasons, their execution cannot be 100% guaranteed. Many traders know how badly an untimed stop can fail. At the same time, futures markets provide an opportunity to fully insure against such troubles. Options are used for this purpose, often in conjunction with futures or positions in the underlying asset. Due to the specifics of an option contract, its buyer cannot lose more than the amount paid for it. This allows you to cost strategies with a predetermined level of loss and profit growth potential.
The ability to earn in any situation
As you know, when trading stocks, you can make a profit only on the movement of prices in a favorable direction. AtThis trader needs not only to guess where the market will go, but also to wait for a strong movement. But futures markets make it possible to build strategies that have the potential for profit in any market situation. For example, those that can generate income with a strong change in the price of the underlying asset, regardless of direction. Such strategies are used in anticipation of the release of resonant news, the publication of issuers' reports, and in other cases. Or, on the contrary, you can make money on the fact that the price of an asset has been practically stagnant for a long time. You can bet on the rise or fall of not a specific company, but the entire market. Or earn on arbitrage between the price of an asset on the stock market and a futures on it - on the urgent. In addition, by opening positions in derivatives that are opposite to positions in the underlying asset, you can protect them from risk (hedge) in case of negative expectations. Futures and options allow you to build many different strategies.
With proper handling of derivatives, a trader opens up huge opportunities for earning and protecting his assets. However, we must not forget about the high risks that derivatives carry when they are thoughtlessly used. First of all it concerns speculative operations. After all, thanks to the effect of "shoulder", not only profit, but also loss increases many times over. Therefore, it is extremely important to apply the principles of risk and capital management in the derivatives market.
