In a derivative market, there is a “long” position of a buyer, and there is a corresponding “short” position of a seller. The willingness of both parties to agree to an exchange at a specific term, on a specific date in the future, creates the derivative position. What are Stock Derivatives? A stock derivative is a financial instrument that contains a value based on the expected future movement and prices of the asset to which it represents or is linked to. The assets in a stock derivative are stocks; however, a derivative in general can take the form of any financial instrument included currencies, commodities, and bonds. The term derivative is often defined as a financial product—securities or contracts—that derive their value from their relationship with another asset or stream of cash flows. Most commonly, the underlying element is bonds, commodities, and currencies, but derivatives can assume value from nearly any underlying asset.