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Deductible Values
Deductible values get their value from other titles and specific transactions fixed to be paid off in the future differing from stocks and bonds that involve immediate transactions. Deductible values include options and future contracts. With an option investors have an opportunity to buy or sell stocks at a specific price within a determined period of time. Options are contracts that give the bearer the right, but not the obligation to buy (selling option) or to sell (buying option) a specific financial asset at a specific price in a determined period of time. Financial assets could be stocks, stock indices or money.
Future contracts are agreements between or among individuals that agree to buy and sell valued financial titles or products at a specific price within a specific time period in the future.
Besides financial valued-titles, stock indices, future interest rates and current money are also negotiated actively with products and raw materials such as precious metals, oil, coffee, orange juice, pork belly, corn and soy among many other articles more.
The biggest difference between investing financial valued-titles directly against investing the same, but through future contracts, is the use of loans. With these future contracts investors only use a small portion of the total value of the contract matter that increases the potential return, but also increase the potential loss risk.