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Derivatives Trading

In the stock market, you can buy and sell shares of companies. Based on these shares, derivatives instruments are also traded on the market. These instruments are an agreement to buy or sell the underlying shares in the future. This agreement is sold in the market. They are called contracts.

Derivative instruments are available for shares, indices, currencies as well as commodities. Their value is tied to the underlying security.

There are two kinds of derivative instruments – futures and options. Futures are contracts or an agreement between two parties to either buy or sell a fixed quantity of assets at a particular time in the future for a fixed price. An option is also a similar contract, except the parties are not obligated to fulfill the terms of the agreement. These contracts are then traded in the market.

What are the benefits?

There are many advantages of trading in futures and options.

Traders also use the secondary market for arbitrage – make more profits.

WHY TRADE IN DERIVATIVES?