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Derivatives 101

Start from the stock you already know. A listed option is a right on those shares, not the shares — and that is the only contract this desk journals.

A derivative is a financial contract whose value is based on something else — the underlying. That can be a stock, an index, a commodity, a currency, or an interest rate. You are not buying that thing; you are buying a claim that moves when it moves.

Start with the stock. Buy 100 shares and you own those shares; profit and loss is just the stock’s price, with no extra contract sitting in between. Sit a listed option next to that position and you still do not own the shares — you own a contract, the right to buy or sell 100 of them at a strike before or at expiration, depending on whether it is a call or a put. A forward is another instrument still: both sides agree today to buy or sell later at a price they fix now, so neither side can walk away the way an option buyer can.

Same stock, three instruments. What changes is not the ticker — it is what you actually hold.

Stock, option, and forward on the same ticker
InstrumentWhat you actually have
StockYou own the shares.
OptionYou have a right to buy or sell the shares.
ForwardYou have an agreement to trade the asset later.

This site journals listed US equity options: sketches, a Greeks lab, Practice mids, and a journal you type. Education only. It never places orders, and it is not financial advice.

The lab below is one listed call. Slide the stock and profit and loss kinks; a futures line would have stayed straight. That is why this desk journals options, not futures.

Four families of derivativeForward and futures are obligations. An option is a right the buyer paid for. A swap exchanges cash flows. This journal stores listed calls and puts only.Four families of derivativeTeaching sketchForwardOTC · mustYouDealertrade later at KPrivate contract. Both names must trade.Not on this desk.FuturesExchange · mustBuyerExchangeSellerSame obligation. Daily margin at the exchange.This site never marks a future.OptionThis journalKBuyer paid a rightSeller owes if assigned.Listed call or put only.SwapCash for cashABfloatfixedTwo cash flows. Not a listed equity option.Out of scope on this desk.
Four families. This journal only stores listed calls and puts — not forwards, futures, or swaps.

Teaching lab

A listed call is the derivative this desk journals

PLTR teaching tape. Slide stock and days — the contract does not copy the stock dollar for dollar.

P/L / share
-0.15
×100
-15
Delta
+0.526
Gamma
0.4340
Theta / day
-0.0118
Vega / vol pt
+0.0146

P/L / share

vs the lesson entry

6.510.00$10$14K $17$21$24

Delta

share-equivalent

1.000.00$10$14K $17$21$24

Gamma

peaks near the strikes

0.430.00$10$14K $17$21$24

Theta / day

clock

0.0000-0.0118$10$14K $17$21$24

Vega / vol pt

fear priced in

0.01460.0000$10$14K $17$21$24

Rho / rate pt

small at 17 days

0.00790.0000$10$14K $17$21$24

Teaching Black–Scholes. Max loss if you sit is the $0.53 debit. Not a live chain.

Next: Calls vs. Puts

Tickets for this structure

BTO (buy to open) · STO (sell to open) · BTC (buy to close) · STC (sell to close). Illustrative fills only. We never send these orders.

BTO (buy to open)

Open a long

Buy a listed option

PLTR $16.58. BTO (buy to open) 1× $17 call at $0.53 ($53). You bought a right, not 100 shares. Max loss if you never STC (sell to close): $53.

STC (sell to close)

Close a long

Sell to close that long

Same call later $1.10. STC (sell to close) at $1.10. P/L (profit and loss) = ($1.10 − $0.53) × 100 = +$57. Still no shares unless a broker stock buy.

STO (sell to open)

Open a short

Sell an option

STO (sell to open) 1× $16 put at $0.42 ($42), cash $1,600. You sold the obligation to buy 100 at $16 if assigned.

BTC (buy to close)

Close a short

Buy to close that short

Put later $0.90. BTC (buy to close) at $0.90. P/L (profit and loss) = ($0.42 − $0.90) × 100 = −$48. Assignment risk ends when the short is gone.

Futures vs options — look, then one number

A future is an obligation: both sides must trade later. An option is a right for the buyer (and an obligation for the seller). The buyer paid a premium for that choice.

PLTR teaching tape, 17 days. 100 shares at $16.58 costs $1,658. The $17 call costs $53. If PLTR is $14 at expiration the stock is −$258 and the call is −$53. If PLTR is $18.21 the stock is +$163 and the call is about +$68. The contract did not copy the stock dollar for dollar.

Futures vs optionsA future is a straight line through the delivery price. A long call is a kink: lose the premium below the strike, then profit as the stock rises.Futures vs optionsTeaching sketchFutureBoth must tradeKStraight line through deliveryLong callBuyer paidKKink. Max loss is the premium.
Obligation vs right. This desk does not mark futures. Replay’s PLTR last is not a futures fill.
A futures trade sits at the exchangeBuyer and seller do not keep each other’s name. The exchange stands in the middle and marks the contract every day. This site never holds that margin.A futures trade sits at the exchangeTeaching sketchBuyerLong the futureExchangeDaily markNot this deskSellerShort the futureBoth sides must deliver. No premium. No listed call or put.
Futures: both names sign. Daily margin lives at the exchange — never on this site.
Futures P/L is a straight lineLong futures rise with the stock through K. Short futures are the opposite line. A long call is a kink, not this picture.Futures P/L is a straight lineTeaching sketchKLongShortP/Lstock
A future is a straight line through the delivery price K. A long call is a kink, not this line.

What we journal

In: listed US calls and puts, the four tickets, delayed Yahoo, Practice mids, Journal fills you type. Out: OTC (over the counter) forwards, swaps, swaptions, listed futures, crypto perpetuals, and any Greek Yahoo did not send. A swaption is an option on a swap — the right to enter the swap, not the swap itself. This desk does not journal those.

How the Greeks move

A long call has positive delta and you pay theta. Slide days toward zero: gamma and theta jump near the strike. Rho is tiny on a 17-day name. The lab is teaching Black–Scholes — not a live chain.

Checking for a quiz…

Teaching numbers only — not a live quote, not a fill, not financial advice. All lessons · Back to Practice · Replay · Journal.