Episode 7: Derivatives 101 with Croft Financial Group's Jason Ayres, Part 1

The Frontier

Jason Ayres is a Derivative Market Specialist by designation, Director of Business Development and an Investment Review Committee member. Jason also sits on the R.N. Croft Financial Group Inc. Board of Directors. In his roll as Director of Business Development, Jason is responsible for the overall management of all strategic and operational marketing and partner/client relationship activities. As a member of the Investment Review Committee, Jason contributes as a market technician and derivative strategist. In addition, Jason has been one of the lead instructors for the TMX Montreal Exchange for the last 9 years, Jason continues to travel across Canada actively advocating the use of options as an important tool in effective portfolio management. Jason is also president of one of the largest and longest running trading and investing educational services in Canada and founder of a successful online resource for pro-active stock and option traders. 2:07 Opening 2:10 Most people think of Derivatives from high school math. What are derivatives in the context of finance? 3:21 Based on my understanding of derivatives, there are four primary types: options, swaps, futures and forward contracts. Can you walk us through an example of each? 14:34 How is the price of a derivative determined? 21:32 To drive the point home, why do derivatives exist? Why would someone want to create one? 25:34 Derivatives have a bit of a bad wrap in the public eye. For example, depending on the context you believe, some people think Warren Buffet described them as “financial weapons of mass destruction”, or that they took part in causing the Financial Crisis. Can you walk through some of the benefits and drawbacks of derivatives in general?