is it a stocks, bonds, or what? thx in advance.
A derivative is anything that derives its value based on somethig else. For example think of a forward agreement to buy an apple. you agree to buy an apple for $2 in one month time. In one months time the price of an apple in the market is $3. So Ure agreement is worth $1. The value of the agreement was derived based on the price of apples.
simmillarly ppl write agreements to buy/sell stocks, bonds, currencies, commodities,etc. All these are colled derivatives. It can be an option or a futures contract.
A derivative is used to protect your investment. Say if you buy a stock and the price drops, your initial capital will not be lost. However, you will have to pay a certain price for it.
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