Derivitives, Futures and Options

[Apprentice88]

Hi.

I'm new to trading and have a few questions on some topics that I'm not clear on.

Derivitives. What are these? I understand that when for example I want to invest in an index such as the SMI, I would buy a derivitive. Is this correct? What else is involved?

Derivities, in turn, involve futures and options (warrants? what's the difference?). How would you explain these two instruments?

To see if I maybe get it, I know that there are call and put options. Call meaning buy and put sell. There is a strike value and in order to make a profit I need to buy or sell my options before or after that strike value. What effect does that ultimately have on my stock?

[jsssm]

First off, if you are a beginner, please just focus on stocks and not on options, futures, etc.

A derivative is something that is based on an underlying asset (usually a stock). So an option on AAPL is a derivative with the underlying being the stock. Look up information at investopedia if you need more specifics. If you buy an option and sell it, it has no effect on any shares you have. The only time it will effect you is if you exercise your option.

If you are trying to hedge yourself, you should instead look at buying inverse ETFs that go up with the market goes down. QID SDS TWM etc. Or just get an account where you can short (but this also has its warnings).