What are derivatives?

Derivatives are a type of instrument which can be used by traders to speculate or hedge positions. In this article, we discuss what a derivative is and some of the common examples of this instrument. Definition of a Derivative Derivatives are instruments where their value is derived from an underlying security. This means the price of the derivatives is dependent on how the underlying asset (being stock, bond, commodities, interest rate) is performing. Types of Derivatives Options There are two …

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What are options?

Investors have a large array of financial products in the market to choose from. One of these products is options.  In this article we discuss what an option is, the uses of options and the pros and cons from using them. What is the definition of an option? The basic definition of an option is a contract between two parties where the buyer has the right but not the obligation to buy or sell an underlying asset at an agreed …

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Covered Call Writing – A How To Guide

Introduction to Covered Calls A call option gives the holder the right to buy a security at a certain price (the strike price) by a certain date (the expiry date). Writing (selling) options is a strategy used to protect portfolio’s and also pick up additional income. It is ideal for long term investors who want to protect their shares without selling them. Only 15% of options are exercised and the rest are either closed early or expire worthless. An option …

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