Financial Derivatives

Introduction financial derivatives

Financial derivatives are financial instruments in which its quote is derived from the price of another financial asset.

Are treated in a contractual agreement where the price of the derivative is removed from the underlying asset from which it is derived, as can be shares, indices, currencies, commodities, bonds, among others.

Characteristics of the derivatives to take into account

Leverage. Is its main feature. Trading them is not required to invest a huge amount of money. It is an advantage, if you are going for the side that you want, but otherwise a great risk.

Allow us to speculate with the right to buy or not to buy an asset and the future price of an underlying asset.

There are financial derivatives that replicate other financial assets, such as stocks, but there are others that are subject to the evolution of non-financial assets, such as commodities (wheat, oil, soybean, for example) or metals (gold, silver for example).

Many derivatives are traded in organized markets, but there are others that are quoted on OTC markets or not organized.

Types of derivatives

There are several and within the financial derivatives, we can distinguish those that are listed in organized markets and that are traded in OTC markets.

In organized markets

Are regulated by the financial authorities, and there are institutions that control by ensuring the correct operation. Among them are:

Financial options


Its main markets are

Meff Spain



LIFE of United Kingdom

TFX Japan

BM&FBovespa of Brazil

These are the recommended, every one who takes risks. We prefer those that are listed in organized markets.

In OTC markets

The OTC markets, which means Over-the-counter are not regulated by the financial authorities. The operations are agreed between the buyer and the seller, so there is a lot of risk.

Among them are:


Binary options


We will see one by one in the following topics, so that you can learn more about these types of derivatives, but remember that the OTC markets are more risky and is not recommended for beginners.

Advantages of financial derivatives

  • Low amount of investment compared with other investments
  • Much leverage
  • Possibility of covering other operations
  • Possibility of win with the falling (to the floor)
  • Disadvantages of financial derivatives
  • This is speculative
  • Leverage, used poorly, risks exorbitant, it can make you lose all the money.