Derivatives

General term used to describe the class of futures-related instruments offered by oil companies, banks, large brokerage houses, etc. These programs are derived from general futures contracts, but often are tailor-made to individual market and company needs. Example: an oil company offering a price cap for No. 2 oil rack prices in Atlanta that’s tied to an OPIS average is offering a derivative. These can be “wet,” featuring actual physical purchases, or “paper,” where only money exchanges hands.