Connect With Us
Register
Login
Derivative definition
A derivative is a financial contract whose value comes from an underlying asset, market, index, or rate. The underlying can be a share, forex pair, commodity, bond, interest rate, index, or cryptocurrency.
A derivative gives you exposure to a market without owning the underlying asset directly. Common derivative products include futures, options, forwards, swaps, and CFDs, and you can hold them to speculate on price, hedge an existing position, or apply leverage.
A derivative is a contract, not the asset itself. When you trade one you hold a position whose price tracks the underlying market without taking ownership, whereas buying the underlying asset means you own it outright. Because the price is derived, the contract carries terms the asset does not, such as margin requirements and an expiry date.
Derivative Example
You expect crude oil prices to rise but do not want to buy and store physical oil.
You buy a crude oil futures contract priced at USD 80 a barrel.
If crude oil rises to USD 85, the contract gains USD 5 a barrel. If crude oil falls to USD 75, it loses USD 5 a barrel, because its value is derived from the underlying crude oil market.
The information provided on this website is of a general nature only and does not constitute personal financial advice. Before acting on any information on this website, you should consider the suitability of the information in relation to your objectives, financial situation and needs. Investing in CFDs and FX Margin Contracts carries significant risks and is not suitable for all investors. You may lose more than your initial deposit. You do not own, or have, any interest in the underlying asset. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. It is important that you read and consider the disclosure document before you acquire any product listed on the website. The information and advertisements offered on this website are not intended for use by any person in any country or jurisdiction where such use would be contrary to local laws and regulations. The Products and Services offered on this website are not intended for residents of the United States, Malaysia and Thailand.
TMGM is authorized and regulated in various jurisdictions.
Trademax Australia Limited, trading as TMGM, is regulated by the Australian Securities and Investments Commission (ASIC), AFSL no. 436416 and is located at Level 28, One International Tower, 100 Barangaroo Avenue, 2000 Sydney, NSW Australia.
Email: support@tmgm.com.au
Trademax Global Limited, trading as TMGM, is authorized and regulated by the Vanuatu Financial Services Commission (VFSC), registration number 40356 and registered at 1276, Kumul Highway, Port Vila, Vanuatu, Republic of Vanuatu.
Email: support@tmgm.com
Trademax Global Markets (SE) Limited, trading as TMGM, is authorized and regulated by the Financial Services Authority (FSA) of Seychelles, with license number SD224. The company is registered at Office No 13, Providence Estate ABIS Centre, Mahe, Seychelles.
Email: support@tmgm.com
Trademax Global Markets (International) Pty Ltd, trading as TMGM, is authorized and regulated by the Financial Services Commission, Mauritius (FSC) with license no. GB22201012, and registered at 33, Edith Cavell Street C/o IQ EQ Fund Services (Mauritius) Ltd Port Louis, 11324 Mauritius.
Email: support@tmgm.com
Copyright © TMGM. All rights reserved