Primary Instrument

Filed Under » , ,
Dictionary Says

Definition of 'Primary Instrument'

A financial investment whose price is based directly on its market value. Examples of primary instruments include stocks, bonds, certificates of deposit, bills and anything else that has its own value. By contrast, the price of derivative instruments, such as options, swaps and futures, is based on the value of their underlying assets.
Investopedia Says

Investopedia explains 'Primary Instrument'

While the markets have established hundreds of instruments to facilitate the flow of capital and the management of risk, primary investments like stocks are what most beginning investors think of when they think about investing. This is because investing in primary instruments requires only basic knowledge of markets and investment principles.

A non-primary instrument would be something like a call option, which gives the owner the right to purchase the underlying stock at a certain price. So, if the price of the stock goes up, the call option's value also goes up. The call's value is based on the value of something else so it is not a primary instrument.

Articles Of Interest

  1.

    A Guide To Real Estate Derivatives

    These instruments provide exposure to the real estate market without having to buy and sell property.

  2. How To Create A Laddered CD Portfolio

    Laddered certificates of deposit offer safe capital and predictable cash flow, while bringing simplicity to your portfolio.

  3. Taking The Bite Out Of A Bear Market

    Find out which financial instruments will protect you from bear market volatility.

  4. Are credit cards and debit cards considered debt instruments?

    Consumer debt instruments allow people to borrow money at specific interest rates. In recent years, the credit industry has become very imaginative in the creation and marketing of consumer debt ...

  5. How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.

  6. Basic Investment Objectives

    You might know about different asset types, but do you know how each type contributes to a particular goal?

  7. Exploring The Current Account In The Balance Of Payments

    Learn how a country's current account balance reflects the country's economic health.

  8. Choose A Fund With A Winning Manager

    We break down the key components of analyzing a fund manager's performance so you can find a winner.

  9. Analyzing The Best Retirement Plans And Investment Options

    Understanding the various retirement investments - from annuities to 401(k)s and everything in between - is crucial to reaching your retirement goals. Here, we examined many of the popular investments ...

  10. Understanding And Playing The Dow Jones Industrial Average

    Learn strategies for investing in this price-weighted index and how to interpret its movements.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  2. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  3. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  4. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  5. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.

  6. Chartalism

    A non-mainstream theory of money that emphasizes the impact of government policies and activities on the value of money.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=4473d6842be6198101650cb71d00bf5a