A derivatives analyst is responsible for one of the most complex aspects of financial trading. A derivative is a product that can be bought and sold but is not a specific product in and of itself, such as a company’s stock or a commodity like gold. A derivative, on the other hand, is something that gets its value from the price of something else.
A futures contract is an example of a derivative. A contract between two parties in which one agrees to buy a commodity or financial instrument from the other at a pre-determined price at a future date.
The idea behind such a contract is that when the contract expires, the market price may be higher than the agreed purchase price. The buyer can then sell the stock for a profit right away. If the price is the same or lower, however, the buyer is unlikely to exercise the option, wasting whatever money they paid for the contract. Contracts are frequently bought and sold to new investors before they expire. The cost will be determined how confident people are that the contract will be profitable when it expires.
There are a variety of other derivatives, such as those based on the overall value of a stock market on a specific date or currency exchange rates. Some derivatives give the holder the option to sell rather than buy something. There is a lot of data to consider because there are so many different setups and factors that affect the profitability of holding a derivative.
A derivatives analyst’s primary responsibility is to collect and analyze this information. This is done in order to provide useful information to traders and managers so that they can make more accurate and informed investment decisions. Some derivatives analysts will also be required to write client reports.
In contrast to teaching or medicine, the role of derivatives analyst usually does not require the same types of mandatory qualifications and examinations. Formal qualifications aren’t always as important as a proven track record in related activities. Many companies, on the other hand, have lengthy lists of requirements for potential employees.
Many employers will require a degree in a related field like mathematics or actuarial science. The majority of companies will require formal training in the software that derivatives analysts use. Candidates may be required to have programming skills in order to develop software that analyzes data in new and often more complex ways.
A derivatives analyst’s salary can be very high. The pay for this job, like many others, varies greatly from one region to the next. A derivatives analyst in New York, for example, may earn at least 50% more than one in a more rural state like Idaho. This is largely due to the fact that the largest corporations are headquartered in major financial centers.
Salaries for derivatives analysts, on the other hand, can be extremely volatile. The average salary for vacant positions fell around 15% in the two years leading up to June 2009, before recovering to roughly the same level as it started. When there is a lack of confidence among investment firms, this is likely a sign that jobs will be harder to come by.