Derivatives are  excellent tools for risk management. Here an investor can buy protection against the market volatility. It’s like buying insurance for our car against accidents. Investors buy protection for their investment by paying a premium. Once the investor gets protections the investment risks become limited.

A certain amount of margin is needed in the trading account to start the derivative trading. Fixed deposits, Cash and Stocks can be used as margin by the brokerage firm as per their rules and regulations.  Once the margin is established, the investor can start derivative trading easily. The profits from the derivative investments are transferred to the investor’s registered bank account as per the instructions provided at the time of opening the trading account. The investor can log in to trading account and down load positions report, transaction report etc.

Yes. This is the big advantage of derivative trading. Your investment amount and derivative trade can be closed on any business day with the guidance from your financial advisor. The profits are credited to your ledger account and can be instructed to be transferred to your bank account. Any time that you would wish to start derivatives trading again is possible too, subject to the availability of margin in your account.