Derivatives tend to be particularly interesting to intraday traders and aggressive investors because of their high volatility.
All cryptocurrencies can be divided into several large groups:
- Futures. This is a contract concluded between two parties on the purchase and sale of cryptocurrencies at a set price on a specific future date (hence the name - from the English word future, that is, the future).At the same time, neither party is obliged to actually own the underlying asset, that is, the coins themselves. Instead, they are simply settled by contract in US dollars or using stablecoins, such as USDT.
- Forwards. Similar to futures, but less standardized and traded not on exchanges, but on over-the-counter (OTC) markets. However, they also imply the purchase of the underlying asset in the future at a certain price.
- Swaps. A more complex version of the futures, which includes two contracts at once. The first implies the purchase or sale of the underlying asset at the time of its conclusion, and the second includes the conditions for the purchase or sale of the underlying asset in the future.
- Options. They also follow the price of the cryptocurrency, however, they do not necessarily have to be calculated exactly on the expiration date of their validity. In other words, traders have options, that is, the ability or right to buy or sell the underlying asset at pre-set prices on certain future dates.
- Perpetual contracts for cryptocurrency. These derivatives differ from futures and options in that they do not have a specific expiration date or settlement date. That is, traders can keep their positions open as much as they want, however, subject to certain conditions. For example, a minimum amount of funds (margin) should always be maintained on a trading account.
- CFD (contract for difference). This is a contract for the difference in prices of the underlying asset. If the asset has fallen in price during its validity, the difference is paid by the buyer. Otherwise, the seller.
Thus, derivatives are excellent tools for active traders who often make deals. And due to the opportunity to work with leverage, derivatives are becoming even more popular with speculators, whose work is aimed at obtaining maximum profit in the shortest possible time. However, in order to make money on these derivatives, it is necessary to understand very clearly the mechanics of their functioning, otherwise, instead of a quick profit, you can just as quickly lose the deposit.