OPTIONS BLOG NEWSLETTER

Derivatives trading is trading based on a financial instrument whose value is based on an underlying asset. As the name implies the price of the derivative is "derived" from the price of another asset. An example of this would be options on stock. The options value is correlated to the price of the stock. In essence, it's a contract between two parties with specific conditions. Options on stock gives the buyer the the right to do something and the seller the obligation to do something at a certain price before a certain time... Many traders hear the term "derivatives trading" talked about in the media with negative connotations. But many don't realize that options are derivatives contracts and options surely have many benefits to both large institutional traders and small retail trader alike.