Trading

Shares, bonds and other financial instruments can be traded on the financial markets. When the trading of securities, currencies and other financial instruments is for immediate delivery, this is known as the spot or cash market. However, much of this trading is not for immediate delivery but for delivery at an agreed price at a later date. This is called the forwards market or derivatives market. These derivatives are themselves financial instruments that can be bought and sold. A derivative is a financial asset whose value is reliant on another underlying asset. There are two types of derivatives:

 
Forwards and Futures - Trading in risk
A 'forward' contract is an agreement to take delivery of an asset on a particular date in the future, at a particular price. Forward contracts can be either traded 'over the counter' (directly between two parties) or on a stock exchange (where they are known as futures). 
Find out how forward contracts developed many years ago and their role in present day markets.

Options - Keeping your options open
An option is a tradable asset that gives you the right to buy or sell an asset (known as the underlying) at a certain date in the future at a pre-arranged price, but you are not obliged to do so.
Listen in as options are explained to a new recruit at our imaginary bank.