HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

History of derivatives. Part 1. What are financial instruments?


You’ve been hearing about trading instruments here and there. This article will briefly introduce you to derivatives, forwards, and futures. Get comfortable and enjoy interesting information. Derivatives are a popular financial instrument. But what is their history, and how do they function?

What’s special about derivatives?

These financial instruments contain some kind of obligation (buy, sell, deliver, and others). These are derivatives, which include forward and futures.

What are forwards and futures for?

Guess what the owner of an olive garden in ancient Greece and a cattle farmer in the 19th-century United States have in common? They’re afraid of their commodity’s price changing in the future. Sellers are afraid of recovering costs, and buyers are worried about paying a lot.

What’s the solution?

They decide to make a deal on mutually beneficial terms. The seller provides a guarantee that he will sell his goods on the appointed date and at a predetermined price. For example, he knows that the right amount of goods will be produced or grown by September 15th and assigns a cost of 200 coins. It is beneficial for the seller, who will recoup the costs and receive a profit without fear of falling prices for their products.

What does the buyer get?

The buyer, in turn, receives a guarantee that, regardless of economic events, the price will remain 200 coins. He is insured against rising prices for goods. Such a transaction is called a forward contract. The difference from a futures contract is that the transaction is concluded without the participation of the exchange. A forward contract is an obligation between the seller and the buyer and therefore has the principle of a derivative.

Thus, people have come to use this excellent way to insure their risks. In the other video, you’ll find out who is the creator of forwarding contracts and when they first began to be used.

#source


RELATED

All you need to know about Bitcoin

Bitcoin (BTC) is a digital currency. It doesn't exist in a physical form. Instead, there is a special cryptocurrency public ledger, which has records of all the Bitcoin transactions...

Bitcoin For Beginners: How To Get Started With Cryptocurrency

Bitcoin is the talk of the finance world once again, beating stocks, gold, oil, and more in ROI over the last decade and more of its history. But the cryptocurrency...

How to Trade During the US Presidential Election?

Unless you've been hiding under a rock for the past year, you've probably heard, read, or participated in some heated discussions about the US presidential race...

Stocks: Top-5 of what you'll want to trade

If you look at the currency charts, they may seem chaotic most of the time. On any timeframe, be it long-term, mid-term, or short-term. The basic reason for that...

Which is the Best Online Trading Platform for Beginners?

If you are new to forex trading, then you must probably be looking for the best trading platform which is usually selected based on top-notch tools and resources...

Stock Indices: What Are They And How To Trade Them

When describing the markets, we might hear of popular phrases like “the market has surged higher” or “stocks tumbled to new lows” when reading and listening to news reports...

What Is a Limit Order?

A limit order is an order that has a prespecified price to buy or sell a security. For example, if a trader is looking to purchase stock with a limit of $10.50, they will only buy the stock...

Understanding the Piercing Candlestick Pattern in Trading: Benefits and Limitations

The vast world of trading is replete with countless patterns and technical indicators, each promising its own set of advantages. Among these, the piercing candlestick pattern stands...

The Worst Mistakes to Avoid When Trading Forex

When someone tells you that trading Forex is easy and you can make tons of money with a few flicks of a finger, know that he is either a fool or a charlatan. Before...

Top6 Benefits of Forex Trading

Forex trading, also referred to as foreign exchange, is the process of exchanging currencies to potentially make a profit, usually for trading purposes...

IronFX: Leverage in Forex. Complete Guide

Leverage is simply borrowed funds that traders use to trade. In other words, it refers to the ability that traders have when opening an account with a forex broker...

What is stock split and stock split reverse?

Apple, Amazon and Tesla have all split their stocks in the past in order to make their shares more accessible to retail investors. In the following article you will learn what a stock split is...

How to buy cryptocurrencies for beginners?

To venture down the path of cryptocurrency trading, one needs a good understanding of what trading typically entails. We’ll be looking at both topics in this article...

What is Algorithmic Trading?

Algorithmic trading (also called automated trading, black-box trading, or algo-trading) uses a computer program that follows an algorithm (a defined set of instructions) to place a trade...

The Past, Present and Future of Trading Success

Let's have a look at some basic needs to find out our story. Let your mind go back to the past, remember that first day when you decided to make your first trade...

What Is a CFD? Contracts For Difference Explained

CFD trading may not sound like much at first, but it opens traders up to an entire world of possibility in terms of trading assets and finance. CFD is an abbreviation...

Cable or Loonie? The ultimate guide to currency nicknames

What are these pro-traders talking about? Who or what are Matie and Guppy? Are they distant relatives or secret code words to enter a sorority?

How to Choose a Currency Pair for Forex Trading

This article is intended primarily for beginners, but it may also be interesting and useful for those who already have some experience in trading in financial markets...

MetaTrader4 vs. MetaTrader5

A trading platform is basically a workspace for traders, their work environment. The quality of trading depends on its functionality and convenience. Many market...

A Guide to Cryptocurrency trading

If you've decided to invest in the cryptocurrency market, as with all investments, it's important to do your research. Although Bitcoin is the most well-known...

FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%
FXNovus information and reviews
FXNovus
75%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.