An important and special tool in financial markets
HomeProductsDerivatives
A Contract Risk Management Tool
Commonly used to hedge against exchange rate fluctuations of futures settlement currencies or commodity price change risks
Futures Contracts
Futures
Options Contracts
Options
Swap Contracts
Swaps
Forward Contracts
Forwards
Function
The original function of derivatives is to hedge futures contract risks. However, since they operate full contract equivalents on a margin basis, they naturally have a leverage effect. Trading them separately as trading commodities is also a very active market phenomenon. They also help determine the future price of underlying assets.
Hedge Futures Contract Risks
Trade Separately for Profit
Determine Future Asset Prices
Natural Leverage
About Risks
Although derivatives are perfect hedging tools for futures contract risks, risks still exist when trading them separately. Risks are related to the margin ratio. Investors should not blindly pursue high-leverage margin trading to avoid high-risk profit-seeking behavior.