Financial terms

Derivatives

Derivatives - the value is derived from the underlying asset (stock, fx, commodity)
Uses - 1. to hedge risk; 2. Speculation - just for profit

Types
Forwards -
A customised contract between 2 parties to buy/sell an asset at a specified price at a future date.
particularly used for hedging, but not on standard exchanges.

Futures
Same as forwards, but standardised and regulated on exchanges.
Has lot size. Monthly lots. Expiry dates.

Options
A contract with rights, but not the obligation to buy (call) or sell(put) a security stock.
Call : You make profit, if your underlying asset goes up.
Put : You make profit, if your underlying asset goes down.
Has lot size. Monthly lots. Expiry dates.

Swaps
It's an exchange of one security for another.