Let’s learn more about Types of Derivatives Markets. Derivatives markets are of many types. Some are traded in the usual manner (i.e. the same as their underlying market), while the others are traded quite differently (i.e. not the same as their underlying market). These markets contribute to the country’s GDP and national income. Also, they affect the demand and supply of the industry.The following are the most often traded types of derivatives markets:
- Futures Markets: An auction market in which participants buy and sell commodity/future contracts for delivery on a specified future date. Trading is carried on through open yelling and hand signals in a trading pit.
- Options Markets: Options are among the most important inventions of contemporary finance. Whereas a futures contract commits one party to deliver, and another to pay for, a particular good at a particular future date, an option contract gives the holder the right, but not the obligation, to buy or sell. Options are attractive to hedgers because they protect against loss in value but do not require the hedger to sacrifice potential gains. Most exchanges that trade futures also trade options on futures.
Others market types are:
- Warrants Markets
- Contract For Difference (CFD) Markets
- Spread Betting
