| A derivative is a security which "derives" its value from another underlying {{U}}(61) {{/U}} instrument, index, or other investment. Derivatives are available based on the performance of stocks, interest rates, currency exchange rates, as well as {{U}}(62) {{/U}} contracts and various indexes. Derivatives give the buyer greater leverage for a {{U}}(63) {{/U}} cost than purchasing the actual underlying instrument to achieve the same position. For this reason, when used properly, they can serve to "hedge" a {{U}}(64) {{/U}} of securities against losses. However, because derivatives have a date of {{U}}(65) {{/U}} , the level of risk is greatly increased in relation to their term. One of the simplest forms of a derivative is a stock option. A stock option gives the holder the right to buy or sell the underlying stock at a fixed price for a specified period of time. |