Derivatives are financial instruments that represents an underlying commodity, bonds or stocks. It gets its value from the the current value of the stock, bond or other commodities that it represents.

A derivative is like a contract where the holder has the right to buy or sell a commodity or asset at an agreed and stated price, however the holder of the derivative is not obligated to do what is stated on the contract.

Various derivatives contracts include forwards, futures, options, swaps, warrants, LEAPS, baskets and swaptions.

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