Derivatives In Nigeria
Derivatives are essentially contracts that derive their value from an agreed-upon underlying asset, index or commodity. Common underlying instruments include bonds, commodities, currencies, interest rates, market indices and stocks.
Why Use Derivatives?
- Leverage provides a capital-efficient way to gain exposure to underlying assets. This creates greater volatility which amplifies gains and losses
- Derivatives allow investors to take advantage of price movements in the underlying assets
- They are typically liquid and easily traded
- They serve as a tool for Portfolio diversification
- The added benefit short-selling afford users the opportunities to benefit from downward price movements
Who is this for?
Derivatives are suited to both professional and private investors who wish to hedge an open position or gain exposure to assets and markets without necessarily holding the underlying assets. Derivatives may also be traded by speculators with the sole purpose of making profits on short-term price movements.
