A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asses.
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This is what Market expert Buffet has to say about Derivative
Further the derivative are broadly divided into 4 groups.
A.FUTURES
B.Options
C.Forward
D.Swaps
However we will talking only about Futures and Options..
Futures: Futures are a type contract which are provided by both NSE and BSE
Contracts are available upto 3 months..namely Current month, Mid month and Far month
Last Thursday of each month is the expiry.
Futures are only brought on contract .
Options:
Its a Financial tool that acts an agreement between two parties at a certain price for a certain period of time
The options are spilted into two one who buys gains the right to hold but not the obligation called as Buyer and other person who sell is called seller who involues the corresponding obligation to fulfill the transaction.
