Search for those terms in google and see what type of explanation makes the most sense to you. There are textbook definitions, legal explanations and more busi

Search for those terms in google and see what type of explanation makes the most sense to you. There are textbook definitions, legal explanations and more business oriented explanations. Read through threads like these specifically for people's anecdotes about how they got screwed over. There's this scene in "the big short" where Eisman is talking to the credit default swap sales guys from one of the big banks. He's never traded credit default swaps before so he knows that he is at a disadvantage. He asks the sales guys, "How do I get f*cked in this deal?" And then he sticks around until they explain the scenarios to him. That's a really good lesson about financial securities. There are so many embedded options that each have a different payout scenario. You need to understand what are the potential future scenarios and how do they impact your position.