When it comes to some of the best investments in the UAE, you have to mention options and futures trading as a popular choice among the people. This business opportunity has a lot of appeal because of its accessibility and profitability. In this comprehensive guide, we will explore what it means to engage in options and futures trading in the UAE, along with insights into Sarwa’s innovative offerings.
An Overview of Options and Futures Trading in the UAE
Options and futures trading in the UAE involves a situation where investors use financial contracts to speculate on the price changes of various important assets like stocks, commodities, and indices. To engage in this investment model, they do not have to own the asset itself. Options and futures trading in the UAE are both useful instruments that an investor can use to make profits concerning price changes. In the following section, we give you an overview of both investment methods:
- Futures Trading: In this type of trading, you will need a futures contract, which acts as an elaborate agreement for you to buy or sell an asset usually at a predetermined price, set to be executed at a certain time in the future. This means that for the deal to be completed, the buyer must purchase, and the seller must sell the given asset any time the contract expires. If you want to take part in futures trading in the UAE, you will have to do this through the Dubai Gold & Commodities Exchange (DGCX).
- Options Trading: Options trading is a type of contract that gives you the right, but not the obligation, to buy or sell an asset at a specified price either before or on a certain date. With this trading model, you have two options: the ‘call option,’ which is your right to buy an asset at a certain price, and the ‘put option,’ which gives you the right to sell an asset at a given price. When compared to futures trading in the UAE, options trading is not as common in the country. It is also worth mentioning that options give traders more flexibility compared to futures, as the buyer can choose not to go ahead with the contract if they see that market conditions are not in their favor.
Key Players in Options and Futures Trading in the UAE
There are several key players in the UAE when it comes to options and futures trading in the country. These include:
- Dubai Gold & Commodities Exchange (DGCX): Offers its users a wide range of products for options and futures trading.
- Brokerage Firms in the UAE: Firms like Emirates NBD Securities and Al Ramz Capital help traders easily access global and local markets for options and futures trading.
Sarwa: Innovative Trading Platform for Options in the UAE
Sarwa has emerged as a pioneering fintech platform in the Middle East, offering options trading and providing a new avenue for investors to engage with financial markets. This service allows users to trade options on various underlying assets, enhancing their investment strategies and risk management capabilities.
Key Features of Options Trading on Sarwa
- Types of Options: Sarwa supports various strategies, including long calls, long puts, cash-secured puts, and covered calls. Each strategy serves different investment goals, from hedging against losses to generating income through premiums.
- User-Friendly Platform: The Sarwa Trade app is designed for both novice and experienced traders. It integrates real-time market data and offers an intuitive user experience, simplifying the decision-making process for users.
- Low Costs: Sarwa charges lower commissions compared to traditional brokers, making it accessible for retail investors. Additionally, it allows free transfers between local bank accounts and trading accounts.
Benefits of Options and Futures Trading
When it comes to options and futures trading in the UAE, there are several benefits associated with this type of business. Some of these advantages include:
- Hedging Against Price Changes: As an investor, you can use both options and futures as a way to fight price changes concerning your stocks, commodities, and other assets.
- Portfolio Diversification: If you are an investor, you can make use of options and futures trading to help diversify your portfolios across different asset classes such as commodities, forex, and indices.
- Profit Potential: While they seem like good investments, it is important to note that both options and futures are risky because they are very volatile and have the potential to undergo significant price changes.
- Leverage: You can easily increase profits by using leverage, but if market conditions are uncertain, this can also lead to huge losses.
The Bottom Line
The UAE financial market offers investors a wide range of opportunities to invest in different business models. If you are an experienced trader in the country, you can use options and futures trading as a way to access the market. These important financial instruments allow investors to speculate on price changes regarding stocks and other assets. This is beneficial because they do not have to own them directly to speculate on the prices.
