Criticisms of the Derivatives Market

1. Risk
The derivatives market is often criticized and looked down on, owing to the high risk
associated with trading in financial instruments.
2. Sensitivity and volatility of the market
Many investors and traders avoid the derivatives market because of its high volatility.
Most financial instruments are very sensitive to small changes such as a change in the
expiration period, interest rates, etc., which makes the market highly volatile in nature.
3. Complexity
Owing to the high-risk nature and sensitivity of the derivatives market, it is often a very
complex subject matter. Because the derivatives trading is so complex to understand, it
is most often avoided by the general public, and they often employ brokers and trading
agents in order to invest in financial instruments.
4. Legalized gambling
Owing to the nature of trading in financial markets, derivatives are often criticized for
being a form of legalized gambling, as it is very similar to the nature of gambling
activities.