Tebae it surprises me a lot of ns, the history derivt reaches very far. Throughout its existence, derivatives have undergone a number of significant changes.

We can come across a number of definitions that characterize derivatives, from simple to complex. Derivatives are financial instruments, their price is derived from the price of the so-called underlying assets. For example, the underlying assets may include shares. Stocks are classically traded on spot markets. If we enter into a derivative contract for shares, its value (price) will develop mainly from spots of the share tax price. Other factors included the current state of supply and demand for derivative contracts and the market.

An essential feature of derivatives is their thermal character. This means that two trading counterparties will close the trade at the moment that its launch will take place in the future. The buyer and the seller thus agree on prices when concluding the trade, at which point the trade will be executed in the future. The profit and loss of the investor who negotiated the derivative contract is deducted from the spot price of the underlying asset at the maturity of the derivative contract. There are innumerable underlying assets, including stocks, currencies, commodities, stock indices and years of peace.

Derivatives are divided into exchange-traded and over-the-counter OTC (over-the-counter) derivatives. The first group are exchange-traded derivatives, which are traded in a precisely defined city (exchange), in a precisely defined period (trading hours of the exchange) and the conditions of traded contracts are standardized (maturity, size of contracts, etc.). The second group are over-the-counter (OTC) derivatives. These derivatives are not traded on a specific basis and trading conditions and their properties are not standardized. We can be tailor-made for business partners. The most well-known stock exchange derivatives include: futures, stock exchange options and futures options. The most important over-the-counter derivatives include: swaps, forwards, FRAs (forward rate agreements), over-the-counter options and CFDs (contract for difference).

Investors use derivatives for two basic elements, speculation and hedging. Speculation is that the investor is trying to profit from the future development of the underlying assets and make a profit. When concluding a derivative contract, the speculator enters into the so-called open position and the measure accepts the risk of his portfolio. In particular, stock exchange derivatives are mainly used for speculation.

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I will ensure that the prospectus gets rid of the risk of possible unfavorable future developments in the financial markets. The provider so-called closes its originally open position and will therefore be immune to future developments in the market. For example, let’s imagine that we own EZ shares, which we bought for 1000 crowns per share. We fulfill them in a year to sell. In this position, the future decline in the share price of EZ will be reflected. Therefore, with the help of a derivative contract, for example by buying a put option, we secure our open share position.

The purchase of a put option means that even during the maturity of the option we have the first, but not the obligation, to sell our shares to the counterparty at a predetermined realized price (strike / exercise price). For this first, we pay the seller of the option, the so-called issuer, the option premium (option premium), which is the price of the option at the time of concluding the option contract. Let’s say that we agree on the realized price equal to 1000 crowns for one share.

If in one year during the maturity of the option the spot price of the EZu share will be lower, we will use our first option and sell the option of our shares for 1000 crowns per share. If the spot price is you, we will not use the option (the so-called expiration option will become worthless and expire) and sell our shares on the spot market at the current spot price, we realize earnings per share, which is the difference between current spots and the original purchase price. With the help of the option, we therefore secured our portfolio in the sense that in one year we will not receive less than CZK 1,000 per share. In the worst case, we will therefore be at zero (of course, the amount is again paid directly to the issuer of the option).

When trading derivatives as well as other financial instruments, there are two basic positions in which investors can be found. It is a long position and a short position. If we buy a derivative contract, we get into the so-called long position or we are long. In the long (n) purchase position, we speculate on the growth of the price of the underlying asset. Let’s buy at a certain price and we want to sell at your price in order to make a profit after the end of this business transaction.

If we sell the derivative contract, we get into the so-called krtk position or we are short. In the short (sales) position, we speculate on a decline in the price of the underlying asset. Let’s sell for a certain price and then we want to buy a price for it in order to make a profit after the end of this business transaction. We can follow the result of long and mole positions on graphs.

When healing, the situation is similar. For example, if we have to meet vr, which is a moving year (volume = short position in the spot market), we can, for example, arrange the purchase of a swap purchase (“receivable” = swap purchase = long position in the heat market), m long position on the heat market is compensated short positions in the spot market. Therefore, a closed position will be created and we will not be affected by the negative development of the floating rate years (from outside).

The following development will be simplified so that the swap partner will pay a variable annual rate, which we will use to pay the variable year from the debt. We will pay our swap partner the agreed fixed annual rate, we will change my floating volume to a fixed volume, which did not depend on the development of the moving year. Our short position on the spot market will therefore be secured.

We can divide derivatives into conditional and unconditional. An unconditional derivative contract is based on the fact that even during the maturity of the derivative, both parties are obliged to perform and sell the contract in accordance with the terms of the contract, so they do not have the option. Unconditional derivatives include, for example, forwards and swaps.

The terms of the derivative contract state that the buyer is not obliged to perform and sell the contract at maturity according to the terms of the contract. The entity in the short position (the one who sold the contract) must submit to the choice of the counterparty in the long position (the one who bought the contract). Among the conditional derivatives are options. If the owner of the option (the one who bought the option) decides to execute the trade, the trade will be sold out by default. If the option holder decides not to exercise the option, the option will simply be forfeited and the trade will not be canceled. The owner of the option pays the so-called option premium to the seller of the option (issuer) for its purchase (option first / first choice).