Flow Derivative

DEFINITION of 'Flow Derivative'

A securitized product that aims to provide maximum leverage. Some popular flow derivatives include vanilla options, leveraged synthetic spot positions (WAVE XXLs) and synthetic structured forwards (such as bonus certificates). Flow derivatives are traded on exchanges or other electronic platforms.

BREAKING DOWN 'Flow Derivative'

Flow derivatives are traded on electronic platforms, hence the availability of real time prices and the ability to place trades automatically. Flow derivatives typically allow investors to take on a directional position on exchange rate movements.

RELATED TERMS
  1. Synthetic

    A financial instrument that is created artificially by simulating ...
  2. Exchange Traded Derivative

    A financial instrument whose value is based on the value of another ...
  3. Synthetic Forward Contract

    A position in which the investor is long a call option and short ...
  4. Synthetic ETF

    An investment that mimics the behavior of an exchange-traded ...
  5. Derivative Product Company - DPC

    A special-purpose entity created to be a counter-party to financial ...
  6. Synthetic Call

    An investment strategy that mimics the payoff of a call option. ...
Related Articles
  1. Trading

    Synthetic Options Provide Real Advantages

    Participate in options trading trading that is simpler, less expensive and easier to manage.
  2. Trading

    Derivatives 101

    A derivative investment is one in which the investor does not own the underlying asset, but instead bets on the asset’s price movement with another party.
  3. Investing

    Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.
  4. Markets

    Get Into Low-Cost Futures Trading With Synthetics

    If you can't trade commodity futures outright, these vehicles provide a less expensive alternative.
  5. Trading

    Warrants

    Learn more about this derivative security.
  6. Trading

    Put-Call Parity And Arbitrage Opportunity

    Look at trades that are profitable when the value of corresponding puts and calls diverge.
  7. Financial Advisor

    SEC Derivatives Rule May Limit Diversification

    The SEC has proposed rules that will limit the use of derivatives by fund managers. Critics believe the rules will impede funds' ability to diversify.
  8. Trading

    Are Derivatives Safe For Retail Investors?

    These vehicles have gotten a bad rap in the press. Find out whether they deserve it.
  9. Trading

    Are Derivatives A Disaster Waiting To Happen?

    They've contributed to some major market scandals, but these instruments aren't all bad.
  10. Trading

    Careers In The Derivatives Market

    The growing interest in and complexity of these securities means opportunities for job seekers.
RELATED FAQS
  1. What expiry months are typically available for derivatives?

    Discover more about the derivatives market and learn about the varying expiration months for derivatives in different financial ... Read Answer >>
  2. How big is the derivatives market?

    Examine the potential size of the total derivatives market, and learn how different calculations can reduce the estimate ... Read Answer >>
  3. Can mutual funds invest in derivatives?

    Find out about mutual fund investment options, and understand whether mutual funds are permitted to include investments in ... Read Answer >>
  4. What are the main differences and similarities between Money Flow and Real Flow?

    Learn the meaning of the terms "money flow" and "real flow," and find out how they relate to each other as they are used ... Read Answer >>
  5. What is the difference between derivatives and options?

    Learn how options are one type of derivative and how equity options derive their value from a stock, and understand other ... Read Answer >>
  6. What are the main differences and similitudes between Money Flow & Real Flow?

    Learn the meaning of the terms "money flow" and "real flow," and find out how they relate to each other as they are used ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center