The price is derived from and based on another financial product.

There are four types of derivatives

  1. Futures Contracts
  2. Options
  3. Rights
  4. Warrants

Futures Contracts

  • buy or sell a specific quantity of an asset at a specific price for delivery during a specific time period


  • buy or sell a specific quantity of a security and a specific price within a specific time period
  • bond from seller for premium in anticipation of an increase in share price (gives leverage)
  • term of 9 months or LEAPS (> 1 yr)


  • allows shareholders to buy more shares from the issuing company
  • issued to the common shareholders (one per share)
  • term of 2-3 weeks


  • allow purchase of shares in the company at a stated price during a specific period
  • on new issues (e.g., $1000 and bonds than 100 warrants)
  • term of 3 years

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