A derivative is a product, whose value is derived from the value of an underlying asset. The asset can be equity, index, forex or commodity. A derivative instrument does not constitute ownership, but is a promise to convey ownership. The mother of all derivative trading is forward trading, which dates back to 12th century.

TYPES OF DERIVATIVES
There are six types of derivatives.
1.Futures
2.Options
3.Swaps
4.Leaps
5.Baskets
6.Swaptions
Presently we are concerned with only the first two namely
the Futures and options.