A derivative is an instrument whose value is derived from the value of one or more underlying, which can be commodities, precious metals, currency, bonds, stocks, stocks indices, etc. Four most common examples of derivative instruments are Forwards, Futures, Options and Swaps.
The derivatives market allows you to discover the prices and risks of securities, commodities and currencies. The derivatives market includes two main standards; Instruments of exchange and transactions concluded between brokers and clients.
These Options are legal contracts that are sold by a seller to a buyer for a specified amount. The buyer of the contract has the option to buy or sell it within a specified period of time. At the end of the specified period, failure to request action for payment or extension of the contract and possible requirements, that contract will expire.
