Derivatives

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Derivatives

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Financial products whose value depends upon the performance of another investment. They allow you
to gain exposure to an underlying investment without actually owning the investment eg. the right to
buy or sell the underlying investment (eg. a share) at a set price at a set time.
They can be used to:

  1. reduce risk (hedging)
  2. make profit from market movements

Derivatives can be complex and also risky if used to speculate on the future direction of the market.
Examples include options, futures and warrants.