What are derivatives? Meet to Suresh. Suresh new to equity investments and wants to know more about detectives. Derivatives that it is a contract between two or more people that didn't deal speculating on the price of the certain underlying asset on future date. Let’s see Suresh filed the share of Reliance currently price set of nine (900) hundred is set to rise considerably in one month. However, Rahul who own some share of Reliance is expecting the price to fold. So Suresh and Rahul enter in the contract buy which Suresh has to buy and Rahul has to sell the Reliance share and agreed of price rupees 950 after 30 days irrespective of the market price. The contract between Suresh and Rahul is a derivative. It allowsSuresh to make a profit by speculating and provides Rahul protection from incoming heavy losses futures and options are two common types of derivatives.