For Any Query Call @ 7088999666 Open 100% Free Paperless Demat Account @ http://bit.ly/2OuyXNJ More Info Visit @ http://bit.ly/33yTc0V Derivatives – Meaning, Types, Advantages, Disadvantages, Check derivatives meaning and derivatives market Information, In this article you can find complete details for Derivatives like – Meaning of Derivatives, Various Types of Derivatives, Advantages of Derivatives, Disadvantages of Derivatives etc. Now check more details from below.. Derivatives Meaning A financial instrument whose value is derived from the value of one or more underlying things like commodities, precious metals, currency and bonds etc., since the value of these is linked to various other securities in the market, they are considered as highly risky. Examples: Options, futures and swaps How do they work? VRP Ltd is a company engaged in making sweets on large scale having operations across all the major cities in India. Most of the materials they use in their regular operations are jiggery, sugar, edible oil, cashewnut etc., The prices of these items are continuously changed depending upon various factors such as production of sugarcane, cashewnut etc., So in order to manage the risk of higher prices VRP ltd enters into agreement with those who produce sugar and other items as needed by them to purchase certain amount of materials at certain agreed prices at a point of time. In future if the prices of these items go above than the prices agreed in the contract then VRP ltd will get benefit in terms of the differences between the current market price and agreed price. Here the value of the contract is a dependent of various commodities. Let’s understand some of the financial derivatives: 1. Options: These are the binding contracts between the parties to buy or sell a particular security, commodity, metal etc., at a given price. Options give the right to buy to the buyer and does not bring any obligation. An option to buy certain security at certain price is a “call option” and the other one which gives the right to sell a security is “put option”. 2. Futures: It is a derivative where two parties enter into a contract to buy or sell a security or any property at certain agreed price for a “future delivery”. There will be an agreement to buy or sell a specified quantity securities or any commodities y in a designated future month at a price agreed upon by the buyer and seller. They facilitate the trading on future exchange. 3. Forward contracts: Most of the difference between forwards and futures lies in terms of liquidity, trading platform and settlement. Forward contracts are customized bilateral contracts between two parties where settlement takes place in future on a specific date at a price agreed today. They are less liquid than futures. 4. Swaps: They are the agreements between the parties to exchange the financial instruments or the resulted future cash flows in future based on agreed criteria such as rate of interest, stock indices etc. ✔️ Almost Zero Brokerage – Save on fees with flat ₹9/- per executed order or Trade at ₹ 999/- Monthly Brokerage Plan across each segment, Orders exceeding 1,000 in a month, brokerage of ₹1 per order will apply Follow RMoney at Facebook at https://www.facebook.com/raghunandanmoneyindia/ Follow RMoney at Twitter at https://twitter.com/RMoneyIndia Follow RMoney at Linkedin at https://www.linkedin.com/company/3580395/admin/
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