This tag is to be used for any question on deravites. It should typically be used in conjuction with the actual instrument being used like Options, Swaps, Futures

learn more… | top users | synonyms

0
votes
1answer
24 views

Future price == strike price in the future contract?

Assume a future contract specifies that the holder of the contract will need to buy corn from XYZ farm at £100 per tonne, 1 tonne. So total deal value when realizing this contract is £100. We all ...
-2
votes
1answer
49 views

How are derivatives different from bucket shops?

How are derivatives like covered warrants or CFDs different from the bucket shops that were made illegal in the US? Should I worry that some regulator decides that my "market maker" is an illegal ...
4
votes
4answers
546 views

Where does the money go?

I've studied the derivatives market, and I've heard of a number of huge losses by firms; I've heard of individuals forewarning against investing in this market. I never hear about the big winners. ...
4
votes
2answers
94 views

How to make an investment in a single company's stock while remaining market-neutral?

Supposing that I "believe" in one particular company, but I'm worried that the stock market may be in a bubble overall. How can I invest accordingly? How can I invest in one particular company, while ...
3
votes
1answer
216 views

How can the writer of an option cancel or reverse the position & obligation before exercise or expiration?

How can the writer of, say, a call option cancel or reverse the position and its obligation (to deliver shares) before the option is exercised or the expiration date reached? Can an option that has ...
-1
votes
3answers
68 views

Who gets the margin call when a bear ETF goes down

When I short the SPY, if it goes up, then I get a margin call based on broker's margin requirements. (Not sure if margin requirements are specified by SEC or individual broker, but that is another ...
2
votes
1answer
345 views

Calculating Daily Returns for Futures Contract

I am calculating daily returns for a position in a futures contract. I am a little stuck with margin and how to account for it. I specifically dont understand how return is calculated after Margin ...
0
votes
2answers
149 views

Is dividend taxation priced in derivatives?

Suppose I have 200$ and I want to track Microsoft's stock (MSFT). For the sake of simplicity suppose I don't pay any commissions and there is no bid/ask spread and no counterparty risk. I have two ...
0
votes
1answer
29 views

Why is the regulation of “swaps” important to failing systemically significant institutions?

I've recently read a nytimes article, which claims that minor details surrounding international regulation of swaps are major roadblocks to plans for safe wind-down of failing global, systemically ...
3
votes
1answer
263 views

How are futures contracts setup at an exchange?

I'm having a hard time wrapping my head around how the actual contracts are structured at an exchange. Here are my questions: If an exchange facilitates the trading of futures contracts and nobody ...
4
votes
1answer
323 views

How do I find the value of British Energy Nuclear Power Notes?

I purchased British Energy shares when the company was floated on the stock exchange back in the late 90's. Now, many years on, I have ended up with Nuclear Power notes. I receive a quarterly ...
1
vote
1answer
1k views

Is the delivery price of a forward contract different from the forward price?

Is there any difference between the delivery price and the forward price of a forward contract? From the definition Investopedia gives of forward price and delivery price, they appear to be the same. ...
1
vote
1answer
874 views

How do freight derivatives like Forward Freight Agreements (FFAs) work?

Re: http://www.balticexchange.com/default.asp?action=article&ID=35 Freight derivatives provide a means of hedging exposure to freight market risk through the trading of specified time ...
0
votes
2answers
182 views

Black & Scholes article : option pricing

I am currently reading the famous article by Fischer Black and Myron Scholes called 'The pricing of Options and Corporate liabilities'. Just at the beginning of the article, they go on and explain ...
2
votes
1answer
148 views

How is the price of VXX determined?

I'm trying to understand how VXX works (the prospectus on Barclay's Ipath). It says that it has a rolling position in futures (1 month and 2 month). Does that mean that it buys and sells contracts ...
2
votes
1answer
243 views

Who is the issuer in a derivative contract?

In the case of a bond or a share, there is a bondholder or a shareholder on one side and a company issuing the security on the other side. In a derivative contract, which party can be named as the ...
2
votes
1answer
128 views

How are derivatives treated in bankruptcy?

If I am a counterparty to a contract (swap, cds etc.) with an entity that went bankrupt and I am due some payment, how "senior" is my claim (amongst the other creditors where do I rank)? I'm sorry if ...
10
votes
5answers
8k views

Buying a small amount (e.g. $50) of stock via eToro “Social Trading Network” using a “CFD”?

On LinkedIn I saw an ad claiming I could buy some AAPL stock for as little as $50. I clicked and came to a site called eToro that calls themselves a "Social Trading Network". It appears the buying of ...
4
votes
3answers
227 views

Margin when entered into a derivative contract

From Wikipedia In finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty (most often their ...
3
votes
3answers
272 views

What is the best way to make a bet that a certain stock will go up in the medium term?

If I want to make a $1000 bet that, say, a share of AAPL will be $1000 in a year's time, what's the best way to do that? AAPL is over $600 today, so with my $1000 I can only afford to buy one share. ...
2
votes
2answers
3k views

Difference between Black-Scholes, Binomial models and Market price in European index options?

Need some help! I have calculated the theoretical price of an index option using BS and Binomial models and are now comparing the three. While BS and Binomial have approximately the same value, ...
6
votes
4answers
268 views

Is it illegal to buy derivatives on your own assets?

Is it illegal to buy derivatives on your own assets? Such as student loans you owe, or your own mortgage?
4
votes
1answer
107 views

What is credit default swap rate?

I understand that for a credit default swap (CDS), its CDS spread is the rate of payments that the buyer of the CDS makes to the seller in each year. I also heard of "CDS rate". I wonder how it is ...
2
votes
4answers
2k views

“Derivative” and “asset-backed security”: Same concept, or related?

Derivative and asset-backed security seem to be similar, as both are based on some other assets. So I wonder if they are the same concept?
4
votes
2answers
196 views

How far into the future is a stock future? How do stock futures work?

I have been looking at the markets recently and most of the time, I see similar articles on how the market is going to do depending on how futures did. I am not that familiar with futures, but how ...
1
vote
2answers
37 views

Meanings of “price of the derivative”

From Wikipedia: a short position in a futures contract or similar derivative means that the holder of the position will profit if the price of the futures contract or derivative goes ...
1
vote
4answers
1k views

What is the meaning of “writing put options”?

From Wikipedia: A long position in a security, such as a stock or a bond, or equivalently to be long in a security, means the holder of the position owns the security and will profit if the price ...
1
vote
2answers
60 views

Are a derivative and its underlying asset traded with the same party?

Suppose I buy a derivative (option, future, swap, ...) now from some party. As specified by the derivative, sometime in the future, I will buy or sell the underlying asset of the derivative. I wonder ...
4
votes
1answer
227 views

Advice for a beginner investor interested in trading stocks and derivatives online?

I wanted to start an E-Trade account more or less just to fool around with. The goal is always to make money obviously, but at first I just kind of want to experiment and get familiar with the ...
3
votes
2answers
699 views

What is a negotiable security and how are they related to derivatives?

From Wikipedia, security is defined as: A security is generally a fungible, negotiable financial instrument representing financial value.1 Securities are broadly categorized into: * debt ...
3
votes
1answer
196 views

Are leverage/ko products the only reasonable way to trade stocks?

As a small investor, there is a number of advantages to buying leverage derivatives instead of the actual stock: fixed stop-loss Once the KO barrier is hit, your money is gone - and you do not ...
0
votes
1answer
172 views

Can the bid price for selling the same call option in calendar spread be different from that in covered call?

I am trying to sell C (citi) call options expiring 2013 Jan at $5.00 in 2 different modes. Calendar spread mode: Bid Price is $0.24 Covered call mode: Bid Price is $1.01 1)Why is there a difference ...
6
votes
5answers
380 views

Is there a Way to Bet on the Trade Volume of a Stock?

Say stock ABC trades 100,000 shares per day. I feel strongly that in the near future it will trade 200,000 shares per day. Is there an instrument I can buy to profit on this? To be clear, I don't ...
7
votes
2answers
148 views

Does a high demand for long commodities Futures push up the underlying spot price?

Let's take a commodity as an example - oil. Suppose there is suddenly a high demand for a 30-day oil futures contract. Will that push up the spot price on oil? I would guess that this would affect ...
5
votes
3answers
268 views

Fund or ETF that simulates the investment goals of an options “straddle” strategy?

With all the market volatility of late, I was thinking that it might be a good short term strategy to employ a straddle approach. For those not familiar with Options trading: This is a strategy ...
4
votes
2answers
102 views

What is the options industry changing about option symbols in February, 2010?

I've heard that the options industry and options exchanges are making changes to options symbols effective February, 2010. What are the specific changes to stock option symbols? Why are the changes ...