Speculating with derivative contracts on an underlying asset typically results in both higher risk and higher returns than speculating in the underlying asset itself.

Question

Quizplus · Accepted Answer

Derivative contracts, such as options and futures, can offer leverage, meaning a small movement in the price of the underlying asset can lead to a disproportionately large gain or loss. This leverage amplifies both potential returns and risks compared to investing directly in the underlying asset.

Speculating with Derivative Contracts on an Underlying Asset Typically Results