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Derivatives

GBP/USD -Flirting Resistance *W - Great British Pound seen on a more broader picture of Weekly Time-frame *W (tf) . Flirting with Trendline Resistance that rejected price action on 4 times of interactions previously. Fakeout occurance would be put to stop by 200EMA coming down as Resistance Ceiling for GBP/USD Breakout of Trendline + 200EMA re-testing them as Supports would give much more room for growth regarding GBP Below Supports - Daily Order-Block *D OB - Last Higher Low at 1.18$ - Weekly Order-Block *W OB TRADE SAFE ! *** Note that this is not Financial Advice ! Please do your own research and Consult your own Financial Advisor before partaking on any trading activity based soly upon this Idea.
by Mr_J__fx
4
Derivatives Trading: A Comprehensive GuideI. Introduction Derivatives trading is a vital aspect of modern finance that encompasses various financial instruments, including futures, options, swaps, and forward contracts. Derivatives are financial instruments whose values are derived from underlying assets such as commodities, equities, bonds, interest rates, or currencies. They provide a robust mechanism for hedging risk, speculating on future price movements, and gaining access to otherwise inaccessible markets or asset classes. II. The Concept of Derivatives A derivative is a financial contract between two or more parties based on an underlying asset. The derivative's price is determined by fluctuations in the underlying asset's price. They were initially created to allow businesses to hedge against price variations in commodities, but they have since expanded to include a vast array of financial instruments. There are four primary types of derivatives: 1. Futures Contracts: These are standardized contracts to buy or sell a particular asset at a predetermined price at a specific future date. Futures contracts are highly liquid, as they are traded on an exchange, and they cover a wide range of underlying assets, from commodities to financial instruments. The price of futures contracts incorporates the cost of carrying the underlying asset, which includes storage costs, financing costs, and convenience yields. 2. Options Contracts: These grant the holder the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a predetermined price within a specific time frame. The price of an option (known as its premium) depends on several factors including the price of the underlying asset, the strike price, the time until expiration, the volatility of the underlying asset, and the risk-free interest rate. 3. Swap Contracts: These involve the exchange of one set of cash flows for another. For example, in an interest rate swap, parties might swap fixed interest rate payments for floating interest rate payments. The pricing of swaps involves determining the present value of the cash flows being exchanged. 4. Forward Contracts: These are non-standardized contracts between two parties to buy or sell an asset at a specified future time at a price agreed upon today. Forward contracts, like futures, involve an agreement to trade an asset in the future, but they are not standardized or traded on exchanges. The pricing of forward contracts is similar to that of futures and involves consideration of the cost of carrying the underlying asset. III. Trading Derivatives Trading in derivatives can occur either on an exchange or over-the-counter (OTC). Exchange-traded derivatives are standardized, regulated, and backed by a clearinghouse that mitigates counterparty risk. In contrast, OTC derivatives are privately negotiated, less regulated, and come with higher counterparty risk. IV. Hedging Risk One of the key functions of derivatives is to provide a hedge against price risk. By locking in a future price for an underlying asset, companies can protect themselves against adverse price movements that might affect their operational profitability. For instance, an airline company might use fuel futures to hedge against potential increases in oil prices, thereby securing their operating margins. V. Speculation and Arbitrage While hedging is a risk management strategy, many traders use derivatives for speculation, aiming to profit from future price changes in the underlying asset. Traders who anticipate a price increase in the underlying asset might buy futures or call options, while those who expect a price decrease might sell futures or buy put options. Arbitrageurs exploit price differences of the same asset in different markets or different pricing of two related assets, creating risk-free profit opportunities. Derivatives, with their leverage characteristic, can enhance these arbitrage opportunities. VI. Pricing of Derivatives The pricing of derivatives is complex and relies onvarious models. Two of the most popular models are the Black-Scholes model and the Binomial options pricing model. The Black-Scholes model , widely used for pricing options, takes into account the current price of the underlying asset, the option's strike price, the time until expiration, the risk-free interest rate, and the expected volatility of the underlying asset. It assumes that markets are efficient, and there are no transaction costs or taxes. However, the Black-Scholes model is less effective in handling early exercise of American options and dividends. The Binomial options pricing model is an alternative to the Black-Scholes model, especially useful for American options, which can be exercised before the expiration date. The model works by creating a binomial tree for possible price paths and assigning probabilities for each path. It then calculates the payoffs for each path and uses discounted backpropagation to derive the option price. The pricing of futures and forwards typically involves determining the cost of carrying the underlying asset to the contract's expiration date. This includes factors like storage costs for commodities, dividends for stocks, and interest costs for financial futures. The pricing of swaps depends on the present value of the expected future cash flows of the underlying assets. For interest rate swaps, the swap rate would be set so that the present value of fixed-rate payments equals the present value of expected floating-rate payments. VII. Counterparty Risk Derivatives trading involves counterparty risk - the risk that one party in the contract will default on their obligations. This risk is typically higher in OTC markets where private contracts are made without a central clearinghouse. To manage this risk, participants may use various methods such as collateral agreements, netting arrangements, and credit default swaps. VIII. Regulatory Considerations Regulation plays a crucial role in derivatives markets. Following the financial crisis of 2008, which was partly blamed on the unregulated OTC derivatives market, regulatory bodies worldwide tightened the rules governing derivatives trading. Regulations now require increased transparency, better risk management practices, and a greater use of centralized clearing to reduce systemic risk. Regulations like the Dodd-Frank Act in the US and the European Market Infrastructure Regulation (EMIR) in the EU are examples of regulatory efforts to enhance market stability, improve transparency and protect market participants. IX. The Role of Clearing Houses Clearinghouses play a vital role in derivatives trading. They act as the middleman for all exchange-traded and some OTC derivative trades. They ensure the smooth execution of trades, mitigate counterparty risk by guaranteeing the obligations of both parties in a trade, and enhance market transparency by reporting trading details. X. Recent Trends and Future Outlook In recent years, the use of derivatives in risk management and speculative trading has increased significantly. The growth of electronic trading platforms has democratized access to derivatives markets, and complex products have been designed to address specific risk management needs. Looking forward, the derivatives market is likely to be shaped by several trends. First, regulatory changes will continue to evolve, aimed at enhancing transparency, reducing systemic risk, and preventing market abuse. Second, technological advancements, particularly in AI and blockchain, have the potential to revolutionize how derivatives are traded and settled. Lastly, the growing recognition of environmental, social, and governance (ESG) factors is likely to lead to the development of new derivative products linked to ESG performance indicators. XI. Conclusion Derivatives trading plays a significant role in modern finance, providing mechanisms for risk management, speculation, and arbitrage. While it carries risks, such as counterparty default and market abuse, its benefits in terms of enhancing market efficiency, price discovery, and risk distribution are significant. As the financial markets continueto evolve, the importance and complexity of derivatives trading are likely to increase, driven by advances in technology, regulatory changes, and the changing needs of market participants. As such, a comprehensive understanding of derivatives and their trading mechanisms will continue to be a vital aspect of financial knowledge.
BITSTAMP:BTCUSDEducation
by BiggWigg
1
#GMX/USDT 8h (Binance Futures) Descending channel breakoutGMX just regained 50MA support and seems to be ready for a rally towards 200MA resistance, probably after a last dip. ⚡️⚡️ #GMX/USDT ⚡️⚡️ Exchanges: Binance Futures Signal Type: Regular (Long) Leverage: Isolated (3.0X) Amount: 6.4% Current Price: 49.74 Entry Targets: 1) 47.36 Take-Profit Targets: 1) 58.39 Stop Targets: 1) 39.99 Published By: @Zblaba TSX:GMX #GMXUSDT #Gambit #DEx Risk/Reward= 1:1.5 Expected Profit= +69.9% Possible Loss= -46.7% Estimated Gaintime= 2-3 weeks gmx.io
Long
by TradingOn
NIFTY |BANKNIFTY|NIFTY ANALYSIS | BANK NIFTY ANALYSIS FOR FRIDAYNIFTY |BANKNIFTY|NIFTY ANALYSIS | BANKNIFTYANALYSIS FOR FRIDAY | nifty analysis for tomorrow | #niftypredictions | nifty live trading |Nifty50 BANKNIFTY:- If Banknifty sustain the level of 44000 and spend time and break 44150, then 44250-44300-44350. If Banknifty break down 44000 spend time below it and break 43950 then 43950-43850-43750. NIFTY:- If Nifty sustain the level of 18650 and spend time and break 18700 then 18750-18000 If Nifty break down of 18650 spend time and break down 18600, then Nifty 18575-18550-18500. This video is for educational purpose and my personal view . We are NOT SEBI registered Advisor, we only give the level on our practical trading experience. Kindly take the trade according to your risk and reward position and consulting your advisor. #stockmarkets #nifty #MarketPrediction #nifty50 #niftyfifty #nfityoutlookfornextweek #bankniftyoutlookfornext week #niftyoutlook #bankniftyoutlook #niftyforecast #bankniftyforecast #niftyshareprice #bankniftyshareprice #tommorrowniftyprediction #tommorrobankniftypredicton #niftytargettommrrow #bankniftytargettommrrow #9th june nifty #9th june banknifty #9th june marketanalysis #bankniftylive #banknifty #bankniftyoptions #bankniftystrategies #bankniftyfuture #bankniftyoptionstrategy #bankniftycalls #bankniftyintraday #bankniftylivetrading #bankniftyweeklyexpiry #bankniftycrash #bankniftytomorrow #bankniftypredictions #bankniftychart #bankniftytips #bankniftypremium #bankniftyoptions #bankniftyfuture #bankniftytomorrowprediction #bankniftyoption #niftyweeklyexpiry #bankniftyweeklyexpiry #nse #bse #stockmarketindia #niftyzerotohero #bankniftyzerotohero #traders #trader #sensex #Derivatives #derivatives #vijayanjum #index #niftyce #niftype #bankniftype #bankniftyce #zerotohero
NSE:BANKNIFTY
by vijayanjum
$GMX/USDT 12h (#Bybit) Rising wedge breakdown and retestGMX (f.k.a. Gambit) lost 100EMA support and got rejected after pulling back to it, bearish continuation would make sense. ⚡️⚡️ #GMX/USDT ⚡️⚡️ Exchanges: Binance Futures, ByBit USDT Signal Type: Regular (Short) Leverage: Isolated (4.2X) Amount: 5.0% Current Price: 72.890 Entry Zone: 74.345 - 77.445 Take-Profit Targets: 1) 67.335 2) 60.890 3) 54.450 Stop Targets: 1) 83.055 Published By: @Zblaba TSX:GMX #GMXUSDT #Gambit #Derivatives #DEx gmx.io
Short
by TradingOn
The Fed Just Broke SomethingThe chart above shows the CBOE Equity Put Call Ratio (CPCS) . Last week the put-call ratio broke its all-time record high, surpassing the levels seen during the Global Financial Crisis and the March 2020 market crash by almost twice as much. In this post, I will explain my thoughts about what's going on. I welcome others to also give their thoughts in the comments below. Let's begin with the basics of the put-call ratio. The put-call ratio is simply a measure of the relative amount of trading in put options versus call options. Typically the put-call ratio rises during periods of extreme fear in the market, when volatility is also high. Historically, the put-call ratio has been used as a contrarian indicator, meaning that when it is very high it signals that too many market participants are bearish and when it is very low it signals that too many market participants are bullish. Typically anything above 1 is considered too bearish. A put-call ratio above 1 has historically marked significant stock market bottoms. However, something very strange has been happening recently. The put-call ratio has been exploding to such extreme levels that some people are now saying the indicator is broken. Last week, the put-call ratio reached an insanely high level (2.4). Yet, on the day this record spike happened, the VIX was in the low 20s, which is only modestly elevated, (see the chart below). As the chart above shows, a VIX in the low 20s is only slightly above normal. The put-call ratio was so extreme last week that one would have expected the VIX to be off-the-charts. In the chart below, I've calculated the general area (marked by a flag) of where we would have expected the VIX to be if the put-call ratio accurately corresponded to such an extreme put-call ratio. Some market analysts and many people on social media are attributing the unprecedented spike to 0DTE , or Zero Days To Expiration, options trading. Zero Days To Expiration refers to options that are traded on the same day (or within 24 hours) that they expire. This speculative form of trading has proliferated over the past year. Those who cite 0DTE as the reason for a malfunctioning put-call ratio argue that its utility as a contrarian indicator has become confounded at best, or noisy and meaningless at worst. The below chart shows the proliferation of Zero Days To Expiration options trading. When compared alongside the put-call ratio, we can visually garner a potentially high correlation. Some market analysts have stated that the proliferation of 0DTE options trading has become so disruptive that not only has it broken the role that the put-call ratio plays as a contrarian indicator, but it has broken the essential role that the VIX plays in measuring volatility. The VIX, which is calculated based on only S&P 500 options expiring 23 to 37 days into the future, may not be properly capturing the true panicked nature of market participants who are mostly trading options with much less time until expiration. Yet, questions remain, even when considering the rising prevalence of 0DTE options trading. Specifically, why is 0DTE causing puts trading, in particular, to increase so dramatically? The answer is likely that 0DTE option trading is not the only cause of the exploding put-call ratio. Some informed market participants have argued that the Fed's extreme monetary tightening is largely to blame, though their reasoning is not as obvious as it may seem. Although it's likely true that the Fed's tightening is likely driving up fear and causing market participants to load up on puts. The more informed explanation involves an arbitrage strategy that seeks to take advantage of those who are loading up on puts. An academic paper entitled, Put Option Exercise and Short Stock Interest Arbitrage , explains this strategy. The strategy takes advantage of those holding deep in-the-money puts with no time value remaining and which ought to be exercised such that the cash can earn interest. Above is a screenshot of the academic paper, which I cannot distribute because of copyright restrictions. I can only show the abstract which is publicly available. For educational purposes, I will cite a small excerpt from the article to explain exactly how the strategy works: The game involves capturing short open interest. The game, dubbed “short stock interest arbitrage,” involves simultaneously buying and selling a large (relative to existing open interest), but equal, number of deep ITM puts and then immediately exercising the long puts. Since exercises are randomly assigned to open short positions, the arbitragers systematically capture the dominant share of the total short open interest and thereby earn the dominant share of the forfeit interest. Now that the Federal Reserve has dramatically hiked interest rates, this strategy is much more lucrative than in the past since the interest that can be earned by arbitragers is much higher. Furthermore, the stock market's decline in 2022 caused more puts to become in the money thereby expanding the volume of puts traded by arbitrageurs. Since this strategy is non-directional, meaning the strategy involves simultaneously buying and selling an equal number of puts, its net effect is theoretically zero. Thus, this strategy's proliferation may be causing the put-call ratio to malfunction. Despite these reasons, other market participants have speculated that the extremely high put-call ratio is due to large institutions and other informed market players loading up on large hedges because they believe a major market crash is coming. While this is largely speculative, there is some evidence that informed institutions are becoming increasingly concerned about a liquidity crisis due to the Federal Reserve's tightening. Last month, the Bank for International Settlements (BIS) recently issued an unusual warning about the potential for a liquidity crisis in the global FX swaps and forwards market. Link to the BIS article: www.bis.org The BIS, which is often thought of as the central bank for central banks, explained that dollar payment obligations in the FX swaps and forwards market are generally not recorded on balance sheets and that the risks associated with these debts could be understated by tens of trillions of dollars. In effect, the Federal Reserve's rapid rate hikes have caused the U.S. dollar to rapidly become more valuable relative to other currencies, creating risks in the FX swaps and forwards market that were not fully anticipated. In some regards, the actual causes of the breakdown of the put-call ratio are not as relevant as the mere fact that it has broken down. According to Exter's Pyramid (shown below), during periods of extreme instability of asset classes lower down on the inverted pyramid, everything higher up becomes some degree more unstable. The meteoric rise in Treasury yields has made everything above shakier, especially derivatives. Rapidly rising Treasury yields are destabilizing the highly-leveraged derivatives market in unanticipated ways.   Now that U.S. Treasurys suddenly yield much more, this means that capital will tend to flow lower down the pyramid into them. Leaving riskier assets higher up vulnerable to collapse. Despite all of this, some market participants continue to believe that the put-call ratio is still a reliable contrarian indicator. These market participants argue that whenever fear is high, people always say "this time is different" when in fact it is not. They believe that not only is the put-call ratio indicator still working but it is indicating a high chance for a major short squeeze. Only time will tell what will become of the current situation. Yet, one thing is for certain. Despite the highest put-call ratio on record last week, the rules of good trading and good investing remain the same. No matter the fear, volatility or crisis that may transpire, if one adheres to these principles, one will be successful. Sources Barraclough, Kathryn and Whaley, Robert E., Put Option Exercise and Short Stock Interest Arbitrage (May 17, 2013). Journal of Investment Management (JOIM), First Quarter 2013, Available at SSRN: ssrn.com
INDEX:CPCS
by SpyMasterTrades
76
$BTCDOM/USDT 2D (#BinanceFutures) Big falling wedge breakoutBitcoin Dominance Index seems about to reverse, ahead of the Ethereum Merge it's an opportunity to hedge against big Altcoins. ⚡️⚡️ #BTCDOM/USDT ⚡️⚡️ Exchanges: Binance Futures Signal Type: Regular (Long) Leverage: Isolated (2X) Amount: 11.8% Current Price: 1197.3 Entry Zone: 1192.8 - 1144.0 Take-Profit Targets: 1) 1168.4 2) 1380.2 3) 1469.0 Stop Targets: 1) 1069.7 Published By: @Zblaba Risk/Reward= 1:1.25 | 1:2.15 | 1:3.05 Expected Profit= +21.08% | +36.26% | +51.46% Possible Loss= -16.90% Fib. Retracement= 0.382 | 0.559 | 0.702 Margin Leverage= 2x Estimated Gain-time= 3-4 months Tags: #BTCDOMUSDT #BTCD #BitcoinDominance #Index #Futures #Derivatives #Dominance Component Info: www.binance.com
Long
by TradingOn
UniDex: a DeFi aggregator for traders🟢 Here is a project that is off the radar in its embryonic phase, whose intention is to be an aggregator of Swaps, Options, Perpetual Contracts, etc. The risk is very high: the token is not yet on any CEX. Only traded on the Ethereum network and Arbitrum network. 📝 Definition "UniDex's primary mission is to provide the most seamless trading experience by aggregating anything & everything. We aim to be the Nasdaq of DeFi. UniDex is a DeFi platform that aims to provide a hub for traders to access the best rates for financial instruments within the ecosystem. We envision UniDex as a platform similar to NASDAQ, where traders can place orders for any type of financial instrument, and UniDex will route the order to the best available rate against hundreds of sources & matching orders. In the short and long term, UniDex plans to offer a range of trading tools to support this experience, including... Options Aggregation Swap Aggregation Perpetual Aggregation Cross-chain trading Exotic leverage trading pairs Advanced analytics and many more opportunities to come " 📈 DeFi For now, the token can be traded on Uniswap (Ethereum network), and on TraderJoe (Arbitrum network).
ULong
by andre_007
Trading 101 - What is a Derivative & why are they revolutionary?Derivatives trading! What I believe has been the absolute market revolution since shares. Derivatives might sound complicated and something you would hear from a professor or a know-it-all businessman – but they’re really not. I am no academic or even remotely one of the smartest guy’s in the world. And if I can grasp the idea and understanding of derivatives, I pretty much guarantee you will too. Also, if you want to take trading seriously and really make a living with it, you’ll need to understand derivatives trading sometime in your career. Let’s start at the very beginning. What is a derivative? – Collins English Dictionary – ‘A derivative is an investment that depends on the value of something else’ When it comes to trading, a derivative is a financial contract between two parties whose value is ‘derived’ from another (underlying) asset. Let’s break that down more simply: A derivative is a financial contract (CFDs, Spread Trading, Futures, Forwards, Options &Warrants) Between two parties (the buyer and seller) Whose value (the market’s price) Is derived (depends on or comes from) Another underlying asset (Share, index, commodity, currency, bond, interest-rate, crypto-currency etc…) You’ll find that the derivative’s market price mirrors that of the underlying asset’s price. Why trade using derivatives? The absolute beauty about trading derivatives is that they are a cheaper and a more profitable way to speculate on the future price movements of a market without buying the asset itself. You don’t get all the benefits with derivatives What’s probably important to note with derivatives, is this. When you buy a derivative’s contract, you’re not actually buying the physical asset. You’re simply making a bet on where you expect the price to go. EXAMPLE: When you buy actual shares of a company, means you’ll be able to attend AGMs (Annual General Meetings), Vote and claim dividends from a company. When you trade derivatives on the underlying share, means you’ll be exposed to the value of the shares and the price movements – and that’s it! As a trader, when you buy or sell a derivative, you’re not actually investing in the underlying asset but rather just making a bet (speculation) on where you believe the market’s price will head. This gives you the advantage and opportunity to: Buy low (go long) a derivative of the underlying asset and sell it at a higher price for a profit or Sell high (go short) a derivative of the underlying asset and buy it back at a lower price for a profit Remember when I said it was cheaper and more profitable? You can thank margin With derivatives, you’ll normally pay a fraction of the price of the total sum and still be exposed to the full value of the asset (share, index, currency etc…) The fraction of the price paid is called ‘margin’. EXAMPLE: To buy and own 10 Anglo shares at R390 per share will cost you R3,900 (R390 per share X 10 shares). To buy and be exposed to 10 Anglo shares using derivatives, and the margin of the contract is 10% per share, means you’ll only pay R390 (R390 per share X 10% margin per derivative X 10 shares). I’m sure you can see that with derivatives, you’ll be exposed to more and pay less which will gear up your potential profits or losses versus when trading shares. This is why we call derivatives, geared financial instruments. Enjoyed the article comment below and follow for more... Trade well, Live free Timon MATI Trader Also my socials are below thanks to Trading View.
JSE:J200Education
by Timonrosso