#Binance
What is derivatives trading?
Derivatives trading is the trading of financial instruments whose value is derived from an underlying asset. In the world of cryptocurrencies, derivatives are contracts that depend on the price of a cryptocurrency or other asset.
Main types of derivatives:
🔵 Futures: Contracts in which two parties agree to buy or sell an asset at a specific time in the future at a predetermined price. Futures allow traders to hedge risks or speculate on changes in the price of an asset.
🔵 Options: Contracts that give the right (but not the obligation) to buy or sell an asset at a predetermined price within a given time frame. Options are used to hedge against price fluctuations or to speculate.
🔵 Swaps: Contracts between two parties that exchange certain financial flows or assets, such as interest rates or different currencies.
Why trade derivatives?
🔵 Hedging: Derivatives are used to protect against risks associated with sudden changes in asset prices.
🔵 Speculation: Traders can make money by predicting price movements of the underlying asset.
🔵 Leverage: Traders can control larger volumes of assets with relatively small funds.
Risks:
🔵 High volatility: Derivative prices can fluctuate significantly.
🔵 Risk of capital loss: Due to leverage, significant losses are possible.
