Lesson 6. Stock Derivatives. In this lesson you will learn about several methods people use to make profits from stock outside of capital gains and dividends. What Are Derivatives? People are constantly coming up with new and more amazing ways to make (and lose) money, and the world of stocks is no exception. | l@ve RuBoard PREVIOUS NEXT k Lesson 6. Stock Derivatives In this lesson you will learn about several methods people use to make profits from stock outside of capital gains and dividends. l@ve RuBoard 4 PREVIOUS I NEXT k l@ve RuBoard PREVIOUS NEXT k What Are Derivatives People are constantly coming up with new and more amazing ways to make and lose money and the world of stocks is no exception. In addition to proper stock as discussed in Lessons 4 What Is a Stock and 5 The Five Types of Stock a number of other stock-like products have appeared in which people speculate and invest. These products while not exactly stocks are directly based on stocks or are otherwise traded in stock markets. Or they are derived from stocks. Because of these characteristics such products are often referred to as derivatives derived from derivatives get it . Here are the various types of derivatives Subscription rights Warrants Options Calls Puts Stock index options Since derivatives generally require more expertise and are substantially more volatile than simple stock transactions newer investors often avoid them. These same characteristics however are the main reasons why derivatives are particularly popular both with seasoned experts having substantial sums and with adventurous new investors who have yet to grow their portfolios. l@ve RuBoard PREVIOUS I NEXT k l@ve RuBoard PREVIOUS NEXT Subscription Rights Subscription rights are formalized promises from a company to sell its stock to its current stockholders at a price reduced from the market price in the event of new stock being issued. Plain English Subscription rights are a type of financial instrument that a company grants to its current shareholders giving them the option to buy future issues of company stock at a discount price. For example let s say you own 100 shares of XYZ Company for which you paid 8 per share. XYZ Company issued only 200 shares to begin with so you effectively bought and own half of XYZ Company. Now the .
