A share of common stock is not a derivative,but an option to buy the stock is a derivative because the value of the option is derived from the value of the stock.

Question

Quizplus · Accepted Answer

A share of common stock is a direct ownership of the underlying asset, while an option to buy the stock is a financial contract whose value is derived from the value of the underlying asset, making it a derivative instrument.

A Share of Common Stock Is Not a Derivative,but an Option