Derivatives

Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Educational content only. Nothing here is a recommendation, and no result is guaranteed.

What you will be able to do

• Explain what a derivative is and the roles of hedgers, speculators and arbitrageurs.
• Calculate profit and loss on forwards and futures, including margin and daily mark-to-market.
• Work out payoffs, breakevens and maximum loss for bought and sold calls and puts.
• Describe how swaps and CFDs work, including spread, margin and overnight financing costs.
• Identify the main risks of retail leveraged derivatives and the protections regulators require.

This module explains what derivatives are, why they exist and how each main type works, with step-by-step worked examples. Afterwards you can read a contract, calculate its payoff and costs, and understand the risks and rules around retail CFDs.

Lessons

1. 1What Are Derivatives?Contracts whose value comes from something else: the big picture before forwards, options and CFDs.7 min
2. 2Forwards and FuturesHow a price fixed today for a trade later works, and how exchanges standardise it with margin.6 min
3. 3Options ExplainedCalls, puts, strike, premium and expiry, with step-by-step payoff examples for buyers and sellers.6 min
4. 4Swaps and Other DerivativesInterest rate, currency and credit swaps explained, plus warrants, spread bets and other contracts.6 min
5. 5CFDs ExplainedWhat a contract for difference is, how it is priced, and a full worked trade with spread, margin and financing.6 min
6. 6Derivatives: Risks and RegulationThe real risks of leveraged derivatives and the UK and EU-style rules that exist to limit harm.7 min
7. ★Module exam15 questions. Pass mark 80%. Earns 200 XP and a Module Master trophy.Locked