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The Question & Answer (Q&A) Knowledge Managenet

The Internet has many places to ask questions about anything imaginable and find past answers on almost everything.

Table of Contents

- What is derivative distance?
- What is first derivative used for?
- Is time a distance?
- Why is the derivative important?
- Are Derivatives Good or bad?
- Are derivatives riskier than stocks?
- What is a future derivative?
- How do derivatives distribute risk?
- What is difference between derivatives and equity?
- Are swaps derivatives?
- What is F and O Trading?
- What is difference between future and equity?
- What is F&0?
- Is Future Trading Safe?

In the discussion of the applications of the derivative, note that the derivative of a distance function represents instantaneous velocity and that the derivative of the velocity function represents instantaneous acceleration at a particular time.

The first derivative of a function is an expression which tells us the slope of a tangent line to the curve at any instant. Because of this definition, the first derivative of a function tells us much about the function. If is positive, then must be increasing.

Time = Distance / Speed. Distance = Speed x Time.

The derivative has many important applications both from elementary calculus, to multivariate calculus, and far beyond. The derivative does explain the instantaneous rate of change, but further derivatives can tell the acceleration amongst other things.

The widespread trading of these instruments is both good and bad because although derivatives can mitigate portfolio risk, institutions that are highly leveraged can suffer huge losses if their positions move against them.

The derivatives derive their value from the underlying stocks. Derivatives are complex in nature and are generally considered riskier for retail investors as trading here is done by anticipating the price of the security. Since, anticipating the price is difficult, the risk involved is also higher.

Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. Futures contracts detail the quantity of the underlying asset and are standardized to facilitate trading on a futures exchange. Futures can be used for hedging or trade speculation.

Derivatives are contracts that allow businesses, investors, and municipalities to transfer risks and rewards associated with commercial or financial outcomes to other parties. Holding a derivative contract can reduce the risk of bad harvests, adverse market fluctuations, or negative events, like a bond default.

Equity is the difference between the value of the assets and the value of the liabilities of something like car or stock in company owned. Derivatives are financial contracts that derive their value from causal asset. These could be stocks, indices, commodities, currencies, exchange rates, or the rate of interest.

A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything.

A futures contract enables investors to buy or sale of a stock at a fixed price for delivery on a later date. Typically, in an F & O segment only the difference in buy or sell price is exchanged between buyers or sellers during a square of (purchase or sale of stocks and the reversal of the same for potential profit).

When you invest in equities, the number of shares offered by a company is finite, until they decide to sell more on the market. So, “buying and holding” is a common strategy for long-term equity investors. But with futures contracts, you agree to buy or sell a commodity at a future date.

F&O stands for Futures and Options. Futures and Options represent Derivatives of the stock market. These Derivatives are the financial instruments deriving their values from an underlying such as currency, gold, or the stocks of a company.

Like equity investments, they do carry more risk than guaranteed, fixed-income investments. However, the actual practice of trading futures is considered by many to be riskier than equity trading because of the leverage involved in futures trading.