Main objective of this financial instrument

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Derivatives can be used for different purposes. They are perfect for hedging against a risk . For example, this could be a rise in the price of raw materials. This could lead to a stock market crash. Buying derivatives is also ideal for speculating. This allows you to multiply your potential gains (without forgetting your losses). It will also be possible to sell short if you bet on a significant drop in the price. To speculate, it is not necessary to become the owner of a rcs database financial asset. You will simply have to predict the changes that this asset will undergo. You will then only have to invest in the asset if you think it will increase. This will allow you to trade. This will also allow you to trade with leverage. You will then be able to open a position for a fraction of the cost.

These derivative instruments also have practical reasons. They will have an advantage in terms of taxation. The dividend of a share can thus be taxed more in one country than in another. The derivative will then make it possible to avoid this high taxation.

The main objective of these financial instruments, however, remains to enable contracting parties to carry out a transaction more easily and without requiring a particularly large outlay. It is also an excellent way to minimise both economic and financial risks linked to unfavourable developments in underlying prices.

Derivatives can also be very useful for the investment strategy called Hedging. This will limit losses significantly.

Main types of financial derivatives
In the field of derivatives, you can find yourself faced with very different products. This market is indeed made up of a very large number of financial instruments that can be traded over the counter or on the stock exchange.

Among several international exchanges that support derivatives products, we can find:

- The Chicago Mercantile Exchange (CME);

- The Intercontinental Exchange (ICE);

- or the ICE Futures Europe Exchange, formerly known as the London International Financial Futures and Options Exchange (LIFFE).

The most common derivatives are called "vanilla". The most complex are the "exotic". You can thus invest in different derivatives, here are some examples.

Firm transaction products
These products commit both parties to a transaction on a specific date (or several dates) defined in advance. This can therefore be a long-term contract. The buyer will then have to buy an underlying asset on a defined date. This mainly concerns contracts linked to industry to buy raw materials at a price fixed in advance. It can also be a Swap, which corresponds to the exchange of financial flows between buyer and seller. You can also find CFDs or Contract For Difference. These derivatives are very simple in appearance. It is then a question of touching the difference between the purchase price and the resale price, multiplied by the given coefficient.