What is an 'Underlying Security'
An underlying security is the security on which a derivative derives its value. For example, a call option on Google stock gives the holder the right, but not the obligation, to purchase Google stock at the price specified in the option contract. In this case, Google stock is the underlying security.
BREAKING DOWN 'Underlying Security'
In derivative terminology, the underlying security is often referred to simply as "the underlying." An underlying security can be any asset, index, financial instrument or even another derivative. Generally, an underlying security's value should be independently observable by both parties, so that there is no potential for confusion regarding the value of the derivative. Investors dealing in derivatives must closely research the underlying security in order to ensure that they fully understand the factors affecting the value of the derivative.

Underlying Option Security
An underlying option security is the financial instrument on ... 
Underlying Asset
A term used in derivatives trading, such as with options. A derivative ... 
Derivative
A security with a price that is dependent upon or derived from ... 
Equity Derivative
A derivative instrument with underlying assets based on equity ... 
Exchange Traded Derivative
A financial instrument whose value is based on the value of another ... 
Derivative Product Company  DPC
A specialpurpose entity created to be a counterparty to financial ...

Professionals
What is a Derivative?
CFA Level 1  What is a Derivative?. Learn the basicas of derivative instruments. Covers various types of options, swaps and differentiates exchange and overthecounter trades. 
Investing
What Is A Derivative?
A derivative is a security whose price is dependent upon or derived from one or more underlying assets. Learn more on how investors can use this financial instrument in their trading strategies. 
Investing Basics
Warrants
Learn more about this derivative security. 
Fundamental Analysis
Derivatives 101
Learn how to use this type of investment as an alternative way to participate in the market. 
Options & Futures
4 Equity Derivatives And How They Work
Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself. 
Options & Futures
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. 
Professionals
Criticisms of Derivatives
CFA Level 1  Criticisms of Derivatives. Discusses types of criticisms facing derivatives. Offers contrasting opinions on the use of derivatives and their role in the market place. 
Professionals
Derivatives
CFA Level 1: Section 15  Derivatives 
Professionals
Purposes and Benefits of Derivatives
CFA Level 1  Purposes and Benefits of Derivatives. Learn the purposes and benefits of derivatives. Discusses how derivatives can yield profits and be used as a tool for risk management. 
Term
Explaining Underlying Assets
An underlying asset is the financial instrument from which a derivative's price is based.

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 does the underlying of a derivative refer to?
Find out more about derivative securities, what an underlying asset is and what the underlying assets refer to in stock options ... 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 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 >> 
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 >> 
Are ETFs considered derivatives?
Learn why most exchangetraded funds (ETFs) are not considered derivative securities and the special circumstances when this ... Read Answer >>