I have been investing for a year, always and only buying/selling stocks. Had decent returns, but I am afraid share prices are very close to their limit. Almost every stock is WAY above its fair value, we know that.
I recently bumped into derivative instruments, and they caught my interest. I never considered them since I am quite risk-averse, but some offered very, very interesting returns.
In a market where stock prices cannot increase much more - correct me if I am wrong - could investing in derivatives be a good idea? Have you ever done it?
Having no experience I am quite afraid, I mean... if Bank XYZ bets that a certain stock/ETF/index/whatever will lose value in future, who am I to bet on the opposite trend?
Thoughts monkeys?
Depends what you are trying to do.
Trading equities is usually just about price dynamics (going up or down, etc). Training derivatives is often trading on second order information (volatility), etc. Hence, to really know what you are doing, honestly requires some decent math background or strong understanding of your own risk profile
If you have traded in equities and have a fair idea about the market trends, Derivatives, as a concept, would not be completely alien to you. Derivative trading is contract based trading where the price depends on the price of underlying asset or assets. To put in simple terms, one bets on the fluctuating prices of the underlying assets, which could be stocks, bonds, commodities, currencies, interest rates and/or market index. The prices of these underlying assets are dependent of several factors like market trends, demand, etc. If you understand these, you can easily trade derivatives, if you face difficulties, you can easily refer to research reports provides by market giants.
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