Futures and Options (2)

High Stakes Investing(2)

It is important to understand fully the risks and financial liabilities involved in trading futures and options before you even begin to consider venturing into these investments.

The complexity of these instruments cannot be fully explained here, so a simplified explanation of what they are is offered here.

Futures and options are basic derivative instruments whose values are dependent on the value of an underlying asset such as

common stocks,
bonds,
indices,
currencies or

commodities e.g.

crude palm oil,
rubber,
cocoa .....

They are often used for risk management or hedging by investors to safeguard their investments in anticipation of future market directions.

Speculators also trade in the market, trying to achieve a profit by buying futures at a low price and selling at a high price.

Speculators are important participants who give liquidity to the market and opportunities for continuous trading