Benefits of Derivatives

These are the Benefits of Derivatives

1. Make Money Without Additional Investment

Derivatives can be traded using collateral or loan against holdings. Which implies unlimited returns with no investment. This is the best feature of derivatives and its strategies. Good Strategy and techniques will minimise losses and maximise profits.

2. Less Investment More Returns

Derivatives are highly leveraged instruments, and hence profits and losses are maximised or magnified. Good Strategy and techniques will minimise losses and maximise profits.

3. Speeds up Wealth Creation

Holding right underlying’s futures in the right trend from start of the trend for a right duration till the end of the trend will accelerates wealth creation. Appreciating assets have asymmetric returns when compared with risks. Using Futures will exponentially increase capital appreciation.

4. Provides Regular Income

Playing through options against the underlying or its futures or its options will give regular income. Good Strategy and techniques will give consistent and regular income. Options are the best instrument to get additional regular, and consistent income.

5. Limits Downside or Limits Losses

Derivatives are the best instruments to hedge the risk or limit downside or limit your losses during uncertain periods. Combination of Derivatives can protect assets from depreciating in value and can enhance the value during steady conditions.

6. Timing the Market

Mutual Funds and Equities create wealth based on time spent in the asset class. While Derivatives accelerate the wealth creation by timing the market. Combining Timing the market and time in the market will speed up wealth creation.

7. Benefit from falling markets

Markets either rise or fall or stay sideways. Unique feature and nature of derivatives is we can combine the underlying and derivatives to make money in all directions of market. Good strategy and techniques will do this benefit of making money in all conditions of market.

8. Lower Transaction Costs

Spot or Physical markets have huge costs involved ranging from buying / selling / maintaining the asset. Derivatives by nature require less investment and hence less transaction costs.

9. Huge Tax Advantage

Derivatives have scope for reducing tax outgo on profits made. Derivatives have dual advantage of less taxes and losses can be carry forwarded.

10. Uncorrelated Returns

Irrespective of economy, general market, industry, sector or stocks. Derivatives and its strategies can generate uncorrelated returns. Unique feature and nature of derivatives is we can combine the underlying and derivatives to make money in all directions of market. Good strategy and techniques will do this benefit of making money in all conditions of market.

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