1.   Derivatives are contracts whose values are tied to an underlying security, such as a foreign currency or a bond.

2.   Hence the clearing house ensures that the underlying securities form a large market capitalization and that there are a large number of shareholders.

3.   Traded options allow investors to enjoy the price movements of the underlying security at a fraction of the cost of buying that security.

4.   Many options may be purchased at a very small fraction of the cost of the underlying security.

5.   These are portfolios of written calls and puts or bought calls and puts with the same exercise price and expiry date on the same underlying security.

6.   The only limitation on the value of a call option before the expiry date is the price of the underlying security.

7.   For example the covered call is a combination of a written call and a long position in the underlying security.

8.   Such an office development generally offers good underlying security and guaranteed future income to the investor or lender.

9.   If they fear a fall in prices, selling a future or acquiring a put option are alternatives to selling the underlying securities.

10.   The amount of margin needed is calculated by reference to both the price of the underlying security or index and the exercise price of the traded option.