Derivative
A derivative is a financial product whose value is based on another asset, such as a stock, index or commodity.
Quick Reference:
Value derived from another asset. Options, futures and CFDs Hedge or specualtion.
Expanded Explanation:
Derivatives do not represent ownership of the udnerlying asset. Instead, they are contracts whose value moves with the price of something else. For example, a futures contact on the ASX200 Index rises or falls as the index itself changes. Options give the right to buy or sell shares at a certain price in the future.
Derivatives can be used to hedge, meaning to protect against risk or to speculate, meaning to try and profit from price movements. Derivatives often use leverage, so losses and gains are magnified. Derivatives are generally too complex and risky for new investors.