In plain terms — A contract whose price «follows» another asset (stock, index, gold). It exposes you to the move without necessarily owning the underlying.
A derivative is a contract whose price depends on an underlying — stock, index, rate, commodity, crypto.
| Type | Basic idea |
|---|---|
| Future | futures — obligation to exchange at future date/price; leverage and margin |
| Option | Right (not obligation) to buy/sell at strike and expiry |
| CFD | cfd — broker contract replicating the underlying |
| Swap | Exchange of cash flows (e.g. rates) |
Why it matters to traders
Derivatives enable leverage, symmetric short, hedging, and access to otherwise illiquid markets. They also introduce expiry, margin, roll, and basis risk — absent in simple spot-market.
Technical and cyclic analysis may apply to the derivative chart or the underlying depending on strategy; timeframe and liquidity of the front-month contract can differ from cash.