Zimbabweans will now be able to buy derivative stocks on the C-Trade Web and Mobile App platforms starting today-22 June 2022. This was announced by C-Trade on their social media platforms. The company, which is a subsidiary of FINSEC will be said the move was meant to help diversify its portfolio as well as offer to allow retail investors the opportunity to trade in alternative securities. This announcement comes hot on heels of another announcement by the Ministry of Information which stated that FINSEC would be part of their ZMX commodities exchange.

What are derivatives?

Most people are already familiar with shares which are also known as stocks. A share is simply a unit of ownership in a company. A stock exchange like FINSEC allows retail (individual) investors to buy and sell shares from various public companies such as Innscore, Econet and others. Derivatives as the name suggest are linked to shares. They are sometimes known as futures because they are essentially a form of a bet on the future value of shares of a given company.

For example, we can have a derivative that promises that whoever owns the derivative in future can be sold the shares of Econet Wireless which are currently valued at $197.56 ZWL at $300 ZWL in 3 months. If you think that the shares of Econet Wireless would be worth $400 ZWL in 3 months you can buy this future. In 3 months if your prediction comes true the maker of the derivative is compelled to sell their shares to you at this price and this means you essentially make a $100 ZWL profit per share as you are buying below market value.

Conversely, if your prediction does not turn out to be true and Econet Shares are actually selling below the $300 ZWL mark you will be compelled to buy those shares at a loss. The maker of the derivative makes a profit.

This is a rather simplistic introduction to the whirlwind world of options (another name for derivatives) trading. It is also important to know that there are other types of derivatives besides futures for example we have binary options but it seems from the press statement it seems like C-Trade will be focusing on futures as we will explain further below.

Which futures will be available

There will be mainly two forms of futures on C-Trade. Stock futures where you trade futures and stock options covering shares of the following entities:

Simbisa
Econet Wireless
Innscor
Delta
Ecocash

Then there are Index Futures which will cover various indexes on the FINSEC Derivative Market:

MCTMT Index Futures ie. M&C Technology, Media & Telecoms Index. This will cover Ecocash HOldings; Econet Wireless and Zimpapers
MCCOM Index Futures i.e. M&C Consumer Index. This will cover Afdis, Axia, British American Tobacco, Delta, Edgars, Simbisa, Truworths, African Sun, Rainbow Tourism, Dairibord Holdings, Innscor, Meikles, National Foods, OK Zimbabwe and Star Africa
MCIND Index Futures i.e M&C industrial Index. This covers Proplastics, Turnall, Larfage, Masimba, Wilddale, Art Corporation, CAFCA, General Beltings, MedTech, Nampak, NTS, TSL, Unifreight, ZECO, Zimplow
MCAS Index Futures i.e. M&C All-Share Index. All listed stocks on the local exchanges.

Derivatives are dangerous!

As you have probably gleaned by now, trading in derivatives is very different from trading in shares. Derivatives are a complex topic and they are hard to value. They are more tricky to handle which is why FINSEC is hosting a Derivatives MasterClass which you would do well to attend if you intend to venture into this field.