Derivative is one of the instruments used by traders to invest via contract. Derivatives are considered controversial on some point, because of the risks they bare and their usage in hedging, etc.

What is derivative

Derivative is an agreement or contract that allows parties to obtain the right or undertake to perform certain actions with respect to the underlying asset. Usually derivatives provide the opportunities to buy, sell, grand or receive a certain asset.

In general, the main purpose of derivatives is not to actually obtain the underlying asset, but to hedge price or currency risk over time, or to profit speculatively from changes in the price of the underlying asset. The result for each party can be either positive or negative.

A distinctive feature of derivatives is that the total number of obligations on them is not related to the total amount of the underlying asset traded on the market. For example, the total number of CFD contracts for shares of a company can be several times bigger than the number of issued shares.

Characteristics of the derivative

Derivative has 3 main characteristics.

  1. Derivative’s price is changing after the price of the underlying asset has changed;
  2. Derivatives require relatively small initial investment in comparison to other similar instruments;
  3. The calculations on derivatives are performed in the future.

Typed of derivatives

The underlying asset can be almost anything: securities, currencies, interest rates, inflation levels, official statistics, etc.

Futures contract supposes that the buyer and seller agree to buy or sell a certain quantity of currency or another asset at the certain established price. The whole idea is that this deal has to be fulfilled on a particular date in the future. The parties are liable to the exchange until the execution of the futures.

Swap contracts are used between two parties as a combination of two opposite conversion transactions for the same amount with different value dates.

Option contract is a contract in which the buyer of an option (potential buyer or potential seller of an underlying asset) has the right, but not the obligation, to buy or sell the asset at a pre-determined price at a future point or over a specified period of time. In this case, the seller of the option is obliged to sell the asset or buy it from the buyer of the option on their terms.

Therefore, CFD, futures, options, binary options, swaps, forwards, warrants, credit default swaps and others – all of those are considered to be derivative contracts.

Use of derivatives

Derivatives are widely used in hedging. Traders also use them to decrease the risks in the underlying asset. To do so, traders enter the derivative contract of a values opposite to the underlying position. Therefore, part of the underlying asset’s position cancels out. 

Derivatives are used to provide leverage to ensure that a small movement of the underlying asset causes a significant change in the value of the derivative.

The reason why some derivatives are considered controversial is that they are also used in speculations for profit when the value of the underlying asset moves in the expected direction. Be careful when using options and other kinds of derivatives to make sure you don’t obtain the unexpected losses.

ফেরত যান

2020-07-23 • Updated

লোকাল পেমেন্ট সিস্টেম দিয়ে ডিপোজিট করুন

Learn more

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.


ম্যানেজার শীঘ্রই ফোন দেবে।

নম্বর পরিবর্তন করুন

আবেদন গ্রহন হয়েছে

ম্যানেজার শীঘ্রই ফোন দেবে।

Next callback request for this phone number
will be available in 00:30:00

If you have an urgent issue please contact us via
Live chat

অভ্যান্তরীন ত্রুটি দেখা দিয়েছে। অনুগ্রহ করে কিছুক্ষণ পরে আবার চেষ্টা করুন

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

নতুনদের জন্য ফরেক্স বই

Beginner Forex book will guide you through the world of trading.

নতুনদের জন্য ফরেক্স বই

ট্রেডিং শুরু করতে সবচেয়ে গুরুত্বপূর্ণ জিনিসসমূহ
আপনার ই-মেইল দিন, আর আমরা আপনাকে ফ্রি ফরেক্স গাইডবুক প্রেরন করবো


আমরা আপনার ই-মেইলে বিশেষ একটি লিংক প্রেরন করেছি।
সেই লিংকে ক্লিক করে ইমেইল নিশ্চিত করুন আর নতুনদের জন্য ফ্রি ফরেক্স গাইডবুক নিয়ে নিন।

আপনি পুরনো ভার্সনের ব্রাউজার ব্যাবহার করছেন।

লেটেস্ট ভার্সনে আপডেট করুন অথবা অন্য একটি ব্যাবহার করুন সুরক্ষিত, আরো সুবিধাজন এবং ফলদায়ক ট্রেডের অভিজ্ঞতার জন্য।

Safari Chrome Firefox Opera