INVESTMENT OF THE FINANCIAL INSTRUMENTS AND THEIR INFLUENCE ON THE EXCHANGE STOCK MARKET DEVELOPMENT

DOI: 10.31673/2415-8089.2024.035460

Abstract

The recent development of emerging capital markets and the expansion of investment alternatives encourage investors to apply complex investment strategies or search for new alternatives for investing capital. The article notes that, among many other investment alternatives, the stock market has a number of advantages, namely, a transparent pricing procedure on the stock market and a variety of trading instruments, which allows a potential investor to invest capital with a view to obtaining a profit on an ongoing basis and, in general, to create an investment plan that fully meets the requirements of material security, financial independence or creation of his/her own retirement account. The paper shows that the prospect of profit completely offsets the risk of losses, despite short-term stock market corrections and crisis periods, as the upward trend lasts much longer than the so-called “correction waves” and lasts about 10-12 years, which, in turn, is associated with business cycles that are revalued in the stock market, which is an indicator of the economy as a whole. Obviously, investment operations in the stock market are certainly profitable in the long run, but with active management of the investment portfolio, much
higher returns can be achieved if speculative operations are used for shorter periods of time (from 1 week to several months), i.e., several instruments are combined in the trading strategy to maximize potential profits and minimize possible risks. The authors have proven that options can achieve 30-40% annualized portfolio returns if used correctly. Speculative strategies that combine the purchase and sale of several types of options allow to determine the limit of possible risks and potential profits.