Bursa Derivatives Education Series

Author: bursaderivatives   |   Latest post: Mon, 31 Aug 2020, 10:12 PM


Derivatives 101

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Q1: What are Derivatives?

Derivatives are financial instruments used to manage one’s exposure in today’s volatile markets. A derivative product’s value depends upon and is derived from an underlying instrument, such as commodities, interest rates, indices or stocks.

In other words, a derivative is a financial contract with a value linked to the expected future price movements of an underlying asset.

It is used as a tool for price discovery, hedging, speculating and arbitraging.


Q2: What are futures and options?

Futures and options are derivative products mostly traded on exchanges. A futures contract is an agreement between two parties to buy or sell the underlying instrument at a specific time in the future at a specific price determined today.

An option however, provides the holder/buyer the right but not the obligation, to purchase or sell a certain quantity of the underlying instrument at a stipulated price within a specific time period by paying a premium.


Q3: What is FKLI?

FKLI is a Ringgit Malaysia (“MYR”) denominated FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) Futures contract traded on Bursa Malaysia

Derivatives providing market participants exposure to the underlying FBM KLCI constituents.

It is actively used by both the institutional and retail investors in their respective trading portfolios.

Contract Size: FBM KLCI multiplied by MYR50.

Settlement: Cash Settlement in MYR


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