Derivatives
Financial contracts whose value is derived from an underlying asset, such as a price or index.
Quick answer
A derivative is a contract whose value is derived from an underlying asset.
Definition
A derivative is a financial contract whose value comes from an underlying asset, like a currency, index or commodity. CFDs, futures and options are all derivatives. You can gain exposure to the underlying without owning it, which is how leveraged retail trading works.
How It Works
- CFDs, futures and options are derivatives
- You trade exposure without owning the asset
- Leverage is built into most derivative contracts
Trading Tips
1
Know what asset your derivative tracks
2
Read the contract terms before you trade it
3
Understand that leverage cuts both ways
Related Terms
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