Derivative products are structured in a manner so as to curtail the risk exposure of an investor. Index futures and stock options are instruments that enable you to hedge your portfolio or open positions in the market. Option contracts allow you to run your profits while restricting your downside risk.

While the very core of derivative products is to manage risk, it is important to appreciate that all derivatives are highly geared, or leveraged, transactions. Traders/investors are able to assume large positions - with similar sized risks - with very little up-front outlay and the risk to the investor is high.

A thorough grasp of product technicalities is only one aspect of the knowledge and skills that traders require. Every trader has a view of the market and their end objective is, of course, profit from that view. And the most effective route to achieving this is to form a view that proves to be correct, having positioned one's self to obtain the maximum profit from it.