Mina Mar Group

Derivative is very complex complex to explain but at its most it is financial contract between two or more parties and it derives its price from an underlying asset. Basically buyer agrees to purchase the asset on a specific date at a specific price. There are numerous types of derivatives and underlying assets can be almost anything but the most common are commodities (oil, gasoline, oil), currencies, stocks, bonds, interest rates and market indexes. They can be traded on unregulated over-the-counter market where transactions happen between private parties or they can be traded on exchange where they are highly regulated and standardized. Bear in mind that OTC constitutes major portion of  derivative market and it caries great counterparty risk - possibility that one of the parties involved might default. Common derivatives are options, futures,swaps and forwards.  Options give the buyer right but not the obligation to sell or purchase underlying asset at a ce...

A hedge fund is an investment fund that collects pools capital from accredited and institutional investors and invest in securities or other type of investments with a goal to generate high returns. What makes them different from mutual funds besides type of investors and diversity of investments is that they are less regulated and have more freedom when utilizing  investing strategies that carry greater risk and potential for loss. Reason why it is available to wealthy investors is their knowledge and understanding of risks involved and ability to afford higher fees and potential loses. This means they can use short selling and other speculative activities unlike mutual funds. To be considered accredited investor individual must have a net worth of $1,000,000 at least or annual income of at least $200,000. Term accredited investor is defined in Rule 501 of Regulation D of Securities and Exchange Commission. Even though hedge funds are not subject to some regulation that...

Warrants are similar to options but there are few key differences. Warrants are derivatives that give the right but not the obligation to the holder to buy or sell security before expiration date. The price at which underlying security can be bought is called strike price and should be bought before an expiration date. Like option there are call warrants that give holder the right to buy a security and pit warrants that give the right to sell security. Underlying securities are commonly equity but they can also be currencies, commodities and other financial instruments. Warrants are issued directly by the company and not the third party. Investors can write options but they can't write warrants. Finding and trading warrants is also more difficult because they usually trade on over-the-counter market and not stock exchanges. If they however trade on exchange they have a thicker of an underlying stock but with letter W attached at the end of the ticker. Warrants are dilutive...

In short, option gives the buyer the right but not the obligation to buy or sell an underlying asset at a set price during the life of the contract. They are considered financial derivative namely derivative is a financial instrument with a price that is based on an underlying asset. In other words price of the option derives its value from the underlying assets that can be futures, commodities, currencies, securities or indexes. Usually they are purchased through online or retail broker. We will discuss stock options where underlying asset is stock. For example option on stock ABC gives option holder the right to buy or sell ABC stock at a strike price up until expiration date. In this case underlying asset is ABC stock because the price of the option is based on the stock price. Writing an option refers to investment contract in which fee is paid for the right to buy or sell shares at a predetermined future date. The fee paid depends on several factors like current price...