Reduced transaction costs. Sometimes derivatives provide a lower-cost way to undertake a particular financial transaction. For example, the manager of a mutual fund may wish to sell stocks and buy bonds. Doing this entails paying fees to brokers and paying other trading costs, such as the bid-ask spread, which we will discuss later. It is possible to trade derivatives instead and achieve the same economic effect as if stocks had actually been sold and replaced by bonds. Using the derivative might result in lower transaction costs than actually selling stocks and buying bonds.