Who trades in derivatives?
Both professional and retail investors trade in derivatives. They offer investors the opportunity to earn extra income from their shares in warrants or options and protect the value of existing shareholdings. They can help increase their exposure to a particular security, such as shares, or help protect their position from a price fall, or to increase sharemarket returns.
Types of derivatives:
- Options. A contract between two parties conveying the right, but not obligation, to buy securities at a pre-determined price, on or before a pre-determined day.
- Trading and Investment Warrants. A warrant is a financial instrument issued by a bank or financial institution and traded on the equities market of the Australian Stock Exchange (ASX). There are a variety of warrants available that give investors the flexibility to meet the demands of the market.
- Futures. Involve trading in identical contracts for delivery of a commodity at a future date.
Options and warrant trading information is published each day in The Australian Financial Review and The Australian newspapers.
It can take a while to come to grips with the best ways to use derivatives to assist your investment strategy. Many people rely on expert advice to get the best outcome and work closely with their broker or financial advisor while they are learning. However, there are many good courses and resources on offer at ASX. To learn more about derivatives as an investment contact the Derivatives Division. They have a range of booklets and other materials available. Or refer to the website: www.asx.com.au/derivatives. You will be able to find all prices and codes there too.
If you are considering including derivatives in your strategy, talk to an ASX accredited derivatives advisor to find out if they are suitable for your purposes. You can call ASX during business hours on 1800 028 585 for direction.
