<prompt> Human: Explain like Im 5, what the heck a derivative is. Someone I know told me they work with derivative, and when I looked them up and asked another person about them, it seemed very vague as to what they actually are.  <response>: Its any financial instrument that derives its value from another asset. Option value is derived from the price of the underlying stock. Futures contracts are derived from the value of the underlying stock or commodity. And so forth. 