Derivatives (Futures & Options) a Risk Management product indicates that the product/contract derives its value from some underlying i.e. it does not have any independent value. This underlying can be securities, commodities, bullion, currency, livestock or something else. In other words, derivatives means forward, futures, option or any other hybrid product/contract of predetermined fixed duration, linked for the purpose of contract fulfilment to the value of a specified asset or an index.
Trading in derivatives involves a lower cost of trading and it also leads to increased volume in the stock market. Investors are always seeking some hedging tool to protect themselves from high volatility. This is possible with the use of Options and Futures Contracts traded in the Derivatives Market.