The two most popular forms of financial derivative securities are futures and options contracts. They are derivatives because they take their value from their connected underlying securities. While we will concentrate on simple options and futures, it should be noted that many other derivative-type instruments build upon these two basic forms. These complex derivatives have fancy and often forbidding names, such as swaps, inverse floaters, leaps, lookbacks, swaptions, quantos, rainbows, floors, caps, and collars.
