Derivative

Derivatives allow exposure to an asset without owning it, which is what makes them efficient for hedging and dangerous for speculating: the same leverage that lets a hedger protect a large position with little capital lets a speculator lose more than they put up. In India, exchange-traded derivatives are futures and options on indices and single stocks, regulated by SEBI and guaranteed by a clearing corporation. Their purpose in a market is risk transfer — someone who does not want a risk pays someone willing to bear it. SEBI's own studies have repeatedly found that a large majority of individual traders in equity derivatives lose money, which is a documented fact worth knowing before treating this category as an opportunity.