A derivatives contract is a financial instrument whose value is derived from an underlying asset, such as stocks, bonds, commodities, currencies, or market indices. These contracts are used for various purposes, including hedging against risks, speculating on price movements, and managing investment portfolios. Derivatives contracts are essentially agreements between two parties to buy or sell an underlying asset at a predetermined price and date in the future.

There are several types of derivatives contracts commonly used in the stock market: Futures Contracts, Options Contracts, Swaps and Forwards.