what is Equity Derivatives?

Answer 1

The Equity derivatives are Futures and Options. They are called derivatives because they are financial instruments derived from an underlying main instrument like Stocks.
Options: It is a conatract entered between two parties one seller and the other buyer with right on the part of the buyer but not the obligation to buyer to purchasing certain quantity of the underlying stock at future date called the 'expiration date' at a fixed price called the 'exercise price'. There are two types of options one called 'call option' and the other 'put'. Put is similar to call except that one contracts to sell instead of buy. The seller of either of the options is also called a 'writer'.
If you are buyer of a call option if the price goes up beyond the exercise price on the expiration day you will gain by the amount which is the difference between that days price of the underlying security and the exercise price.
There are two types of Options, American and European. American options can be liquidated any time between the date of contract and expiration date where as European option cannot be. European options has to be held till expiration day.
Futures:
It is a contract entered between two parties to buy certain amount of the underlying security at a future date at a future price. You can buy and sell futures. It has no specific name like Options. Here sometimes delivery of the underlying physical asset is undertaken though in Options most of the time this is not done.
It is more complicated to explain the physical delivery side tradig so left to you to figure it out from the infromation I have given, like if you hold physical asset futures can be used to hedge the price fluctuations which will adversley affect the price of the physical asset against you.

Answer 2

If you don't know this answer to this question...STAY AWAY FROM IT.

When you buy a stock, you own it, and it is termed "BEING LONG" the stock. You own it, and if it goes up, you make a profit, if it pays dividends, you can get paid if you own it at the right time, If the stock goes down in price, you are not as rich as when you bought the stock.

You can borrow the stock from a broker and sell it, This is called Short selling, You do not own the stock, but feel it will go down, and you will buy it back at a lower price and keep the difference between selling and buying.

Derivitives are more complex, You can buy an option, to buy a stock at a certain price in the future, If the stock goes up, you exercise your call, at the price you agreed to and sell the stock at a profit, If the stock falls, you do not exercise your option and lose the transaction cost.

Or you can make a put, where you agree to give someone the right to buy the stock at a certain price at a certain time in the future, You hope the stock does not go up, so you can keep the transaction fee.

Then there are futures where you can lever your investments by putting a small amount down with and agreement to take the stock or commodity, at a certain price in the future (extremely Risky)

But these are examples of Derivitives
Unless you are a very experienced investor, with lots of money....STAY AWAY !!!!!

Answer 3

An equity derivative is a financial, investment vehicle tht derives its value from one or more securities, an example would be an exchange traded option of a publically, traded company. This option would give the person who owns the option the right to buy or sell a stock at a particular pre-determined price.

Answer 4

http://en.wikipedia.org/wiki/Equity_derivative