A derivative is a financial security with a value derived from one or more underlying assets. Common derivatives are futures contracts, forwards, options, and swaps. Derivatives are often traded over the counter but can also be traded on an exchange. Many derivatives are leveraged.
What is derivative trading?
Derivative trading allows for long or short positions on assets to speculate on future price movements without buying the asset itself. Derivatives are often traded to hedge other positions taken in the market.
Derivatives can be traded both through a regulated exchange or over-the-counter between two unregulated parties.