Abstract: Derivatives Metrics

Derivatives are financial instruments whose value is derived from an underlying asset, such as stocks, commodities, currencies, or cryptocurrencies1 2 3. They are widely used for purposes such as hedging (protecting against price fluctuations to reduce risk exposure)4 5, speculation (seeking higher returns by taking on greater risk)6 7, leverage (enabling larger positions with less capital, thereby increasing risk exposure)1, and arbitrage (exploiting price discrepancies between markets to earn profit with minimal risk)8. The dynamics of these contracts and the way they are traded by market participants can influence the prices of the underlying assets and reveal expectations about future price movements9 10. In this context, derivatives metrics emerge as essential analytical tools. Indicators such as open interest, funding rate, long/short ratio, and put/call ratio provide meaningful insights into market participants’ positions, prevailing sentiment, and potential price movements11 12. This document explores the role of these metrics in understanding derivatives behavior and their application in strategic decision-making.

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