Trading with Financial Derivatives : The Economic Objectives and Post Investment Behavior

Financial derivatives are the instruments which would help to transfer market risk and provides protection against losses resulting from unforeseen price changes. However the investor’s decision to trade with derivatives is primarily influenced by their economic objectives on investment and the behavioral mind set. It is also observed from the literature that previous trading experience with derivative instruments plays a dominant role in shaping the future investment decision of the investors. Considering the above hypotheses we have conducted a wide spread survey among 1020 investors located in south Kerala region. We have employed Friedman Test and Paired sample T- test for analyzing the input data. The results revealed that the fundamental economic objective of using financial derivative contract was to maximize the portfolio return. The study also revealed that the previous trading experiences playing a vital role in shaping investors attitude towards derivative instruments