Derivatives are financial instruments that derive their value from an underlying asset or group of assets. They are contracts that give the holder the right, but not the obligation, to buy or sell the underlying asset at a predetermined price and time.

Derivatives are commonly used by traders and investors to speculate on the price movements of underlying assets, such as stocks, bonds, commodities, or currencies. They can also be used by companies to hedge against risks, such as changes in interest rates or commodity prices.

There are many different types of derivatives, including options, futures, forwards, swaps, and contracts for difference (CFDs). Each type of derivative has its own unique characteristics and risks, and it is important for traders and investors to understand the differences before using derivatives in their trading or investment strategies. Derivatives can be highly complex and risky, and it is important to trade them carefully and with a full understanding of the potential risks and rewards.