The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Why are options sometimes called derivatives?” Derivatives are basically any financial instrument that derives its value from something else. And so, this is why options contracts are called derivatives because they derive their value from the underlying stock, ETF or index that they are trading on. Now, if you think about it, every insurance contract out there is also a derivative because any insurance contract is deriving its underlying price and value based on the property or person or car or business that it's trying to ensure. Almost conceivably, many insurance contracts are not always exactly the same because one insurance contract on your house may be different than an insurance contract on somebody else's house and it’s the same thing in the options market. Options derive their value from one stock versus one ETF versus another index. And so, that's why they're someti