A derivative, as the name suggests, is a financial instrument whose value is derived from another asset (known as the underlying). The underlying can be a stock, a commodity, and a market index among other things. The two main types of derivatives are options and futures.
Option:- An option gives you the right to buy or sell the underlying asset but not any obligation. There are two types of option:
1.) Call (Bullish towards the market)
2.) Put (Bearish towards the market)
These are further classified into two categories.
CA = Call American CE = Call European
PA = Put American PE = Put European
Future:- A futures contract is a standardised, tradable contract, which requires the delivery of the underlying asset (commodity, stock etc.) at a specified price and specified future date.
However both are very risky but option is more risky than future.
:rofl::rofl: