What is the difference between share, stock, equity, derivatives and delivery in detail?
Stocks are sold in units called shares. These shares represent equity or ownership in a company. Derivatives are products that are derived from other assets(stocks, bonds, precious metals, etc). They are typically considered riskier than the underlying assets because they include leverage. For instance, a stock option is considered a derivative of the stock. Using the stock option you can buy or sell a contract that will be worth something if the stock moves up or down within the time period specified in the contract. You can buy an IBM 30 June Call option and what that gives you is the right to buy 100 shares of IBM at 30 US Dollars before the 3rd Friday in June. If IBM share price moves above 30 then your contract is worth something. If IBM share price doesn’t move above 30 before the 3rd Friday in June, then your contract expires worthless. This is why this type of derivative can be riskier than the underlying stock.
