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The way markets are turning out to be speaks volumes of the mental makeup of investors. It is like the befuddled deer, which fails to do an inward journey, for that elusive, soothing smell and searches for it in its vicinity despite the fact that the smell emanates from it. Such has been the mental state of investors resulting into losses and the subsequent lull, which has put off investors from the markets.

Though a resurrection of the markets seems bleak, that ray of hope has not yet faded. The reason, just as the sun sets there is always the moon to show you the way. So is it with the markets. A case in point is the derivatives markets, which is so often left unnoticed by investors involved deep in the cash market. Whatever be the reason, there are ways and means by which you can make money with the help of a few derivatives products in the markets, just like a category of investors is minting. Here is the roadmap of that journey for you.

The way

Derivatives, essentially, are products, which derive their value from the underlying asset like commodities, equity, interest rates, currency etc. Derivatives products had gained momentum since 2004 especially in the equity market. However, a lot has changed after 2004. The liquidity in the derivatives markets has increased three times in 2008 as compared to the cash market. Hence, this has increased the importance and focus of the derivatives markets. More so, it has necessitated the understanding and exposure to these markets.

There are two products available in the equity derivatives market-futures and options. Futures functions similar to the cash market with a difference that the price of the futures is derived from the underlying spot index or stocks, while options are different from futures. There are two types of options- put and call. You can buy and sell both the options.