A derivative is a financial security with a value that is reliant upon or derived from, an underlying asset like Indices (NIFTY and BANKNIFTY) and Stocks. The derivative itself is a contract between two or more parties and the derivative derives its price from fluctuations in the underlying asset.

An investor who purchases an options contract has the opportunity, but not the duty, to purchase (or sell) shares at a predetermined price at any time before the contract expires. In contrast, a futures contract, unless the holder’s position is closed earlier, mandates a buyer to buy the underlying security or commodity—and a seller to sell it—on a certain future date.