Derivatives Other Than Future And Options

The most commonly suggested derivatives by share market tips experts are forwards, futures and options, which are commonly known to traders. Investor actively trading in the market should know other about other derivatives also. Let us know about derivatives other than these.

Warrants: Validity of options is up to one year in general, mainly the options traded on options exchanges with option trading tips, having a maximum validity of 9 months. Options which are dated for the longer term are called warrants and are generally traded over-the-counter. These are also a part of recommendations from option trading tips researchers.

LEAPS: The acronym LEAPS means Long-Term Equity Anticipation Securities. LEAPS have maturity up to three years and type of options.

Baskets: These are options on portfolios of underlying assets. The underlying asset is usually an operating average or a basket of money making resources. Equity index options are a form of basket options.

Swaps: Swaps are agreements between two investors who agreed to exchange cash flows in the future according to a prearranged formula. They can be regarded as portfolios of forwarding contracts.

The two commonly used swaps are:

Interest rate swaps: These entail swapping with parties in the same currency, for only the interest related cash flows.

Currency swaps: These entail swapping both principal and interest between the parties, with cash flows. In these, two parties exchange a minimum of two currencies weighting equal value to each other.

Swaptions: Swaptions are options to buy or sell a swap that gets triggered at the expiry date. Thus a swaption is an option on a forward swap. Unlike having call and put in the options, the swaptions market has receiver side swaptions and payer side swaptions. A receiver swaption is an option to receive fixed and pay floating. A payer swaption is an option to pay fixed and receive floating.