Derivatives are financial instruments or other contracts that have the following characteristics at the same time:
01 Features
Its value varies with changes in specific interest rates, financial instruments**, commodities**, exchange rates, indices, rate indices, credit ratings, credit indices or other variables, and if the variables are non-financial variables, the variable should not have a specific relationship with any party to the contract.Interpretation:
The value of a derivative financial instrument changes as something changes.
It's like the math equation y=a+bx that I learned in elementary schoolThe value of a derivative financial instrument is y (the dependent variable) and something is x (the independent variable).
This X is mainly a financial variable, such as interest rate, exchange rate, stock price, credit rating, etc.
02 Features
No initial net investment is required, or a smaller initial net investment is required compared to other contracts that react similarly to changes in market factors.Interpretation:
The essence of derivative financial instruments is to play something (that is, the x in the previous article), and the premise of being able to play is to pay the entrance fee, which is characterized by the fact that the entrance fee isVery low.
For example, if I want to bet on a company's ** can rise from 100 to 1000 in three months, I can have two options:
One is that I spend 1 million to buy 10,000 shares, and then sit back and wait for ** to appreciate, and cash out 10 million after three months, with a net profit of 9 million;
Another option is that I spend 100,000 to buy 10,000 call options (admission fee), then sit back and wait for ** to appreciate, and cash out 8.9 million (1000-100-10=8.9 million) after three months
See the difference?
The initial investment required to purchase a derivative financial instrument is much smaller than the purchase of the underlying financial instrument (in this case, **) itself.
MoreoverIt is precisely because of the small initial investment that the leverage of derivative financial instruments is much greater.
Just like the first option above, it is to use 1 million to earn 9 million, and the second option is to use 100,000 to make 8.9 million.
The initial investment is 10 times worse, but the end result is similar.
This is known as derivative financial instrumentsGrow big with a small amountThe charm. (Of course, don't get me wrong, I don't mean to encourage everyone to speculate on options).
03 Features
Settlement at a future date.Interpretation:
Since it's a game,It must be a game about something in the futureAfter all, the past has become history, whether it is good or bad is a foregone conclusion, and what is the game.
Or the above example, for example, I bet that the company's ** will rise from 100 yuan shares to 1,000 yuan shares in three months, and it will take three months to see the difference, right?
04 Summary
Finally, a quick summary: