Exchange Traded Derivative
Derivatives represent contracts based on some underlying asset. Futures and options are examples of this type of contract.
You buy an option to purchase 300 shares of NFLX at $400. That type of contract would qualify as a derivative.
An exchange-traded anything is a standardized version of that thing, which can be bought and sold in a marketplace. The most famous version would be exchange traded funds, or ETFs. These funds represent baskets of securities, but trade on the market as a single entity. You can buy and sell them like a stock, even though they can potentially represent stocks from hundreds of different companies.
An exchange traded derivative is a form of options contract that is standardized enough that it can trade in a futures market.
You hear about these trades all the time. When people talk about the price of oil, they are talking about the price of exchange traded derivatives based on barrels of oil. Futures trading is based on these types of contracts, comprising the market for things like gold, wheat, coffee, and dozens of other commodities.
"When in doubt, go long." -Joe Montana
Related or Semi-related Video
Finance: What is a Derivative?23 Views
finance a la shmoop what is a derivative? well it's derived it's a something taken
from something else like a derivative of hot weather is thirst a derivative of [Girl takes sip of glass of water on a beach]
hunger is well you know crankiness that's diva thing you get there...
derivative of a 1/32 quarterback rating in the NFL is like serious wealth yeah
yeah discount double shmoop yeah look for it be on there with aaron
and a derivative of a stock or bond or other security is a something which
derives its value based on the performance of that underlying security
there are basically two flavors of derivative put options ie the right to [Ice cream flavors appear]
sell a security at a given price over a given time period and a call option, ie
right to buy a security at a given price over a given time period
well the price of that option is derived from the price of the security and a few
other factors like strike prices and duration and all that stuff
colonel electric the downgraded new version of General Electric is trading [Colonel Electric appears in a suit]
for 25 bucks a share a derivative of its share price is sold in the form of a
call option with a $30 strike price expiring about 90 days from now on the
third Friday of the end of that month well investors pay a price albeit
probably a small one for the right to then pay 30 bucks a share for colonel [Call option appears for colonel electric]
electric at any time in the next 90 ish days until that option expires making the bet
that the stock will go well above 30 bucks a share in that time period that
call option is thus a derivative of the colonel electric primary stock price got
it if you really want to get personal well here's the ultimate form of
derivative [Baby laying down]