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Derivatives \ A collective name for futures, options and warrants.
A collective term for securities whose prices are based on the prices of another (underlying) investment.The main derivatives are:futuresoptionsswapswarrantsconvertiblesThe attractions of derivatives from an investor"s point of view are:Large profits (but also losses) can be made on a small stake, because they offer "leverage".Because derivatives are essentially a bet on which way the price of the underlying instrument is going, you can make money whether the market goes up or down, which is not true if you invest in shares where you only make a profit if the share price rises.Derivatives can be used to reduce the risk (or hedge) of an investment in the underlying instrument.In general, derivatives are high-risk investments and not suitable for the ordinary investor.