Derivative – Confessions of a Derivatives Trader


                              "If you want to have a better performance than the crowd, you must do things differently from the crowd.

                                -Sir John Templeton"

Whenever we read the word confessions, we usually wonder “ Oh, some dirty secrets are about to be spilled out. I will get more informative”. Well, let’s just say that the informative part will hold true, but the former one, not so sure of ‘DIRTY’.

Clash With the World

The Google dictionary defines the term derivative as “something which is based on another source”. Quite interestingly, derivatives in the markets hold a similar definition. For the uninitiated, let me state that a derivative is an arrangement or product (such as a futures, options, or warrants) whose value derives from and is dependent on the value of an underlying asset, such as a commodity, currency, or security.

Yeah, I know, for the newbies, this must have come off as a tide of crankiness due to a hurl of a lot of words. But practically, it is simpler(or not?). Derivatives are contracts with the value of the contract being based on a financial product. Most prominent being futures, options, and swaps.
You might be thinking why to get into such menace, when you have traditional systems of investments, giving you safe returns. But as they say, everybody is willing to be diamond, but few want to get cut.

Masses wish to get a higher return than an average investor just by listening more to the news and professional analysts opinions rather than doing their own study and research on the market.

It is said that the worldwide derivatives market if you include options, futures, swaps, forex spreads etc, is more than 300 trillion. Whereas the total size of the global economy is less than $72 trillion. This is 4 times larger than the global economy itself.


So is it the Devil's Play or Baby's Day Out?

Most of the popular financial media stories of our times portray a picture that derivatives posses a very high risk of losing the ball. But is it so? Yes, Derivatives are sophisticated gizmos. Yes, a novice might get burnt. But they also are risk management tools. If applied judiciously, they can produce great financial results.
We at
Mudraksh &McShaw have been immersively codifying derivatives for the last so many years. We derivative traders are treasure hunters to the core. Let me make you experience our adventure universe.

Recommended Read: Trading can take over your life – but only if you let it

Live it, Feel it – When you walk the path of conquering the markets, little do you know that the market will ultimately end up owning you. It quietly enters your mental realm and ignites a desire to become the Galileo of the financial universe. You get the zeal to burn a ton of midnight oil in order to master the indomitable spirit of the markets. In the process, without knowing, you start resonating with the frequency of the financial markets. Time -Space becomes irrelevant in the quest of the magic potion.

It's – a Roller Coaster Ride – It’s nothing new in telling that capital markets are not for the meek. It can go up it can go down. Derivatives are the same. Sometimes you have the fear to go all down so as to reach the core of the earth, and sometimes the thrill of going so high that you touch the skies. But if you are not a reward-risk champion it can drown you deep into the ocean bed where Titanic lies.


Riding a Capricious Lion – Derivatives have a semblance to Zlatan Ibrahimovic. It appears to be indecorous outside the field but goes on to be the best player on the team when at play. For example, in our initial days, we got 1000% return within one week and the next week watched our money going all the way down to 75 % like hell to Perseus.

If Only Closed Minds Came With Closed Mouths – Most of the knowledge we get is from the “market experts” who do not invest their own money in the markets but rather bumble out prophecies after prophecies about the future turn the market will take.Predictions of these “Finance Nostradamuses” come out to be correct once, in 5 years, that too by a fluke and then they beat their chest in the race claiming themselves to be the oracles of the financial realm. Capital Markets posses the charm to put in their correct place these so-called “big guns”, who just have opinions but no insights.

Into the Heart Of Sea – No doubt Derivatives Trading is a bet. You become a master in risk management. Just like sailing your boat through a storm, keeping precautions for the sail, continuously changing its directions according to wind flow, you have to devise new strategies while in the market.

Just Remember, there will be bad days and really bad days, but there will be good days and really good days. So keep trading, keep learning, keep analyzing, the markets are yours.

Read more for series: Click Here!


Related Posts

Leave a comment