In the derivatives market, the term “shark” refers to investors or financial institutions with superior financial power and significant influence on the market. They are the “big players” capable of executing massive transactions, manipulating prices, and seizing opportunities to earn high profits. So, who exactly are the “sharks” in the derivatives market? Let’s explore this with VPS in this article!
“Sharks” in the derivatives market include:
1. Large investment funds
Large investment funds with massive asset sizes and top financial experts have the capability to execute high-value transactions. Their buying and selling decisions impact the price of a single stock or derivative contract and influence the entire market trend.
2. Financial institutions
Investment banks and large financial institutions participate not only as investors but also as market makers, providing liquidity to the derivatives market. These organizations have the ability to manipulate prices through complex trading strategies such as arbitrage, hedging, or using advanced trading algorithms.
3. Professional investors
Apart from institutions, some individual investors also possess the financial capability and knowledge to become "sharks" in the derivatives market. They are often seasoned investors who understand market trends and can influence prices through unique trading strategies.
The role of “Sharks” in the derivatives market
Sharks can impact the market in various ways. They can:
Creating waves: Executing large transactions that cause significant price movements.
Price manipulation: Using financial power and information to drive prices in their favor.
Exploiting opportunities: Leveraging technology and knowledge to identify and capitalize on trading opportunities.
How can price impacts from "sharks" be avoided?
In the derivatives market, institutional and professional investors often use derivatives as a tool to hedge risks for their underlying portfolios. Therefore, individual investors need to pay special attention to critical market periods, especially the expiration dates of derivative contracts.
Expiration date is the last day a derivative contract remains in effect. On this day, all open positions are closed. Individual investors should be cautious when opening new positions on expiration dates unless they have thoroughly analyzed market trends.
For open positions, individual investors should consider using risk management tools, such as setting automatic stop-loss orders on the trading system. This helps minimize losses if large investors ("sharks") make decisions that go against the expectations of individual investors.
Conclusion
In the derivatives market, "sharks" play a crucial and influential role. Understanding them provides us with a clearer view of how the market operates and the factors that can affect prices and trends. Understanding "sharks" can help smaller investors make smarter and more effective investment decisions.
Identifying and understanding the "sharks" in the derivatives market helps you protect your assets and opens up many attractive investment opportunities. Always keep up-to-date with information and monitor market movements to make the right investment decisions!
