Underlying Security Definition.

Underlying security definition:

A security that is traded on an exchange and used as the basis for a derivative security, such as an options or futures contract. The underlying security can be a stock, bond, commodity, currency, or index.

What are futures and options?

Futures are standardized contracts that are traded on an exchange. The contract specifies the price at which the underlying asset will be traded at a future date.

Options are contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a certain date. What is an underlying investment? An underlying investment is the asset upon which a derivative security's value is based. The most common underlying investments are stocks, bonds, commodities, and currencies.

What is an underlying contract?

An underlying contract is a contract between two parties that specifies the terms and conditions under which one party will buy or sell an underlying asset to the other party at a future date. The underlying asset can be anything of value, such as a stock, bond, commodity, or currency.

What are underlying shares? Underlying shares are the shares of stock that are used to determine the value of an option. When you buy or sell an option, you are actually buying or selling the right to buy or sell a certain number of shares of the underlying stock at a set price. The underlying shares are the shares of the underlying stock that would be bought or sold if the option were exercised. What are option derivatives? An option derivative is a financial instrument whose value is derived from the value of another asset. The most common type of option derivative is a stock option, which is a contract that gives the holder the right to buy or sell a stock at a specified price within a certain period of time. Other types of option derivatives include index options, currency options, and interest rate options.