What is an 'Equity Derivative'
An equity derivative is a derivative instrument with underlying assets based on equity securities. An equity derivative's value will fluctuate with changes in its underlying asset's equity, which is usually measured by share price.
BREAKING DOWN 'Equity Derivative'
Investors can use equity derivatives to hedge the risk associated with taking a position in stock by setting limits to the losses incurred by either a short or long position in a company's shares. The investor receives this insurance by paying the cost of the derivative contract, which is referred to as a premium. If an investor purchases a stock, he or she can protect against a loss in share value by purchasing a put option. On the other hand, if the investor has shorted shares, he or she can hedge against a gain in share price by purchasing a call option.
Options are the most common equity derivatives because they directly grant the holder the right to buy or sell equity at a predetermined value. More complex equity derivatives include equity index swaps, convertible bonds or stock index futures.

Underlying Option Security
An underlying option security is the financial instrument on ... 
Derivative
A security with a price that is dependent upon or derived from ... 
Exchange Traded Derivative
A financial instrument whose value is based on the value of another ... 
Underlying
1. In derivatives, the security that must be delivered when a ... 
Derivative Product Company  DPC
A specialpurpose entity created to be a counterparty to financial ... 
Underlying Security
The security on which a derivative derives its value. For example, ...

Trading
Derivatives 101
A derivative investment is one in which the investor does not own the underlying asset, but instead bets on the assetâ€™s price movement with another party. 
Trading
4 Equity Derivatives And How They Work
Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself. 
Investing
Derivatives 101
Learn how to use this type of investment as an alternative way to participate in the market. 
Trading
Warrants
Learn more about this derivative security. 
Trading
Are Derivatives Safe For Retail Investors?
These vehicles have gotten a bad rap in the press. Find out whether they deserve it. 
Financial Advisor
SEC Derivatives Rule May Limit Diversification
The SEC has proposed rules that will limit the use of derivatives by fund managers. Critics believe the rules will impede funds' ability to diversify. 
Trading
5 Equity Derivatives And How They Work
These derivatives allow investors to transfer risk, but there are many choices and factors that investors must weigh before buying in. 
Trading
Are Derivatives A Disaster Waiting To Happen?
They've contributed to some major market scandals, but these instruments aren't all bad. 
Trading
Futures, Derivatives and Liquidity: More or Less Risky?
Futures and derivatives get a bad rap after the 2008 financial crisis, but these instruments are meant to mitigate market risk. 
Trading
Careers In The Derivatives Market
The growing interest in and complexity of these securities means opportunities for job seekers.

How big is the derivatives market?
Examine the potential size of the total derivatives market, and learn how different calculations can reduce the estimate ... Read Answer >> 
What does it mean to be long or short a derivative?
Find out more about derivative securities and what it indicates when traders or investors establish a long or short position ... Read Answer >> 
What expiry months are typically available for derivatives?
Discover more about the derivatives market and learn about the varying expiration months for derivatives in different financial ... Read Answer >> 
Can mutual funds invest in derivatives?
Find out about mutual fund investment options, and understand whether mutual funds are permitted to include investments in ... Read Answer >> 
What is a derivative?
A derivative is a contract between two or more parties whose value is based on an agreedupon underlying financial asset, ... Read Answer >> 
What is the difference between derivatives and options?
Learn how options are one type of derivative and how equity options derive their value from a stock, and understand other ... Read Answer >>