Derivatives

All derivatives are basically financial contracts ( PIECES OF PAPER ) that allows investors to benefit from the price movements of an underlying asset which means that the value of that piece of paper is directly related to the asset's price linked to that piece of paper.

#myRealization Wait what, so derivatives is us basically we selling papers here. Contracts Selling contracts, that's just it. We don't own anything physically, it's just PAPER, ALL PAPER

Example:
Owning a physical gold carry risks such as storage costs, need of security and insurance expenses while owning the price movements of gold (derivates) still benefits from the rising of price without owning the physical gold itself.

Derivates can be useful for

• mitigating risk (Hedging)
• commensurate reward (Speculation)

Common underlying assets for derivates

• Fleeting - Stocks or Shares
• 3. Resources/Finance/Bonds
• Commodities
• Currencies
• Interest Rates
• Market Indexes

Conclusion:
Derivatives are basically paper with a price and these are used for Hedging or Speculation which requires an underlying asset to give value to the paper which can be Fleeting - Stocks or Shares, 3. Resources/Finance/Bonds or Commodities etc...