Derivative Markets – A Birds eye view

Derivative instruments derives from an underlying commodity or stock or Index. There are different types of derivative instruments like Forwards, Futures, Options and swaps. The forwards are traded in over the counter while the futures and options are traded in the exchanges.
While Futures is an obligation on both the buyer and seller, the options only give a right to buy or sell to the buyer of the contract. The seller of the contract has an obligation to buy or sell at the agreed price. The right to buy is called as call options while the right to sell is called as put option.