If I had to point out the most dangerous derivative in the world, I would unhesitatingly say it is the contracts in the cryptocurrency space. To what extent is it dangerous? I am already very skilled in leveraged trading to the extent that going back to stocks feels more difficult, yet I would never touch cryptocurrency contracts. Because its leverage exceeds the orderly and reasonable range.
Once leverage shakes hands with chaotic volatility, the trading field will turn into a complete casino.
There are no degrees required in front of a casino. Gambling nature is a spear of human nature, easily piercing through the cloak of higher education. Graduate students and PhD candidates from prestigious universities lack the ability to measure risk, let alone manage it. Unfortunately, the KOLs in this circle overlap with idols from the 85-00 generation, such as Jay Chou and Li Xiaolai... They do not set good examples for young people; instead, they attract many fans to step into the casino's door.
For those without a financial background, to play derivatives well, you must first understand trade/market. At this stage, you can look at the Dow Jones Index, which is a standardized, highly liquid index that can help you understand what trading is. There are many interpretations of it, and you can find observational entry points based on your industry and work. Additionally, you can also choose the S&P 500, S&P 100, or Russell 1000. The purpose of this step is to understand non-leveraged trading.
The second step is to understand leveraged forward trading, and you can look at crude oil. This adds a pricing concept over time compared to the first step. Other aspects remain the same, but due to the many influencing factors, and since 2024, the weight of the industry supply and demand affecting its price has decreased, while the financial and macro attributes have increased, making it easier for outsiders to observe and think.
The third step is to understand options trading. You can look at the options for Tesla, Meta, and Nvidia. Here, we should not look at the index options from the first step, but it is better to switch to US stocks and commodities, or ETF options within ETP options. This step is very difficult, mainly due to cognition; many people believe that options are only for highly intelligent individuals or are merely elusive lotteries. The investor education in Chinese is poorly done, to say the least. Most people have misunderstandings about futures, let alone options. In fact, options are the best risk management tool, particularly elegant, old money old school. Of course, the premise is that you must know how to use them.
I am Xiao O, a professional analyst and educator, a mentor and friend on your investment journey! As an analyst, the most fundamental task is to help everyone make money. I will help you resolve confusion and position trades, speaking with strength. When you feel lost and don’t know what to do, follow Xiao O, and I will point you in the right direction.
