www.CandlestickForums.com Derivative Contracts Derivative contracts are agreements by which a trader gains leverage on investments in underlying financial instruments such as stock shares. Derivative contracts derive their value from the underlying instrument. However, they offer the opportunity for greater profit, the option to buy stock or sell stock at a given price, the possibility of hedging risk, and the possibility of trading where there is no underlying financial instrument. Derivatives contracts include those used in trading options, futures, commodities, foreign exchange trading, interest rates, or credits.