How does “trading desks”, “assets”, “liabilities” “financial instruments” within that liabilities or assets, and “exposure” all play together? If someone shows you a value and call it the exposure of this trading desk for today, what does that even mean? What are they trading exactly? Stocks? Then why do some trades are labeled as “liability” that has financial instruments and can you even trade a liability? What does that mean?
In: 0
in modern times, a trading desk is basically an account on a trading platform. Back in the day, it was one of actual desks on the “floor” of an exchange. It is also used to describe all the instruments that were purchased or sold by the desk; it is essentially a mini-company with its own balance sheet.
Asset is something that (might) make money for you. E.g. something you can sell, the money you have lent to somebody, or a bet where you get paid if you win.
Liability is the opposite, something that will/might cost you money in the future. Money or things that you borrowed, or a bet where you have to pay if you lose.
Some financial instruments are a mix of asset and liability. Futures contract can lead to you paying or getting paid, depending of whether price of underlying traded item will go up or down, and which of these did you bet on.
Exposure measures how much you will have to pay if certain traded item has a change in price. E.g. if you are US-based company that borrowed Euro’s, then you are exposed to Euro exchange rate: since if Euro increases in value, you will have to pay a lot more (in dollar terms) to settle that debt. If you have a lot of such exposure, you might consider getting “insurance”, in the form of a bet that pays if Euro goes up. If you do not deal with Euro, you have no exposure to it, and need not worry about movements of its exchange rate.
Financial markets trade all sorts of things. Stock = ownership share of companies, commodities like grain or oil, foreign currencies, government and corporate debt (in the form of bonds), derivative contracts (options and futures) that are bets on prices of any of these.
If you want to make money on exchange, you will need to get a much better understanding of these things. Try a fantazy portfolio first, so you do not risk any actual money.
if somebody promises you “easy” or “guaranteed’ income, they are trying to scam you. Or they fell for the scam, and want to recruit more people into their pyramid.
The only way to reliably make money in financial markets is to predict what will happen in the future, and make more accurate predictions than huge corporations with insider info, supercomputers, and teams of Ph.D.’s.
Whatever “tips” or “inside info” you get, the big guys got them hours before you, and already traded away the profit opportunity.
In fact, a very common scam is to buy a lot of some something, then spread the rumor that it will go up, so amateur traders will start buying, which will bring up the price temporarily. Then the scammer sells their holdings for a profit, stops the rumor mill (or runs out of gullible investors) and price falls back, so all the amateurs who jumped on the bandwagon lose money.
Latest Answers