Derivatives
a.k.a. Futures, CFDs
Contracts whose value comes from something else, like a currency, stock or commodity. Futures, options, swaps and CFDs are all derivatives.
A derivative is a contract tied to the price of an underlying asset. You do not own the asset itself; you own an agreement whose value derives from it. Options, futures and CFDs (contracts for difference) are common examples.
Derivatives let people hedge risk, such as an airline locking in fuel prices, or speculate with leverage. Many retail forex and commodity trades are actually derivatives under the hood, which is why losses can exceed what you first put in on some products.
Trading a derivative without reading how it works: its expiry, its costs, and whether losses can exceed your deposit.
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