Derivatives are contracts whose value derives from another asset, called the underlying asset. That asset can be a share, a currency, a commodity or a cryptocurrency. If you hold a derivative, you don't own the asset itself, only a contract that rises or falls in value as the asset's price moves.
Common types
- Forwards and futures: an agreement to buy or sell an asset at a fixed price on a set date.
- Options: the right, but not the obligation, to buy or sell an asset at a set price within a set period.
- Perpetual futures: contracts that never expire and are widely used in crypto trading.
Read more about perpetual futuresPerpetual futures (perps)A derivative with no expiry date that tracks the price of a crypto. Regular payments keep it close to the market price, and it allows leverage..
What are they used for?
Derivatives are used to protect against price changes, for example when an exporter locks in an exchange rate in advance. They are also used to profit from price movements, often with LeverageLeverageTrading with borrowed money, which multiplies both gains and losses and can wipe out your whole stake in a short time., and for short sellingShort sellingSelling an asset you don't own in the hope of buying it back for less. A short seller profits if the price falls.. Leverage makes trading derivatives risky, and you can lose your whole margin in a short time.
Rules in Europe
In the EEA, derivatives count as financial instruments. They fall under MiFID II, the EU directive on markets in financial instruments, and not under MiCAMiCAThe EU regulation on markets in crypto-assets, in force in Iceland since 1 January 2026, which sets the same rules for crypto services across the EEA.. That also applies to derivatives on crypto.
In February 2026 ESMA, the EU's securities markets authority, reminded firms that perpetual futures are likely to fall under the restrictions on contracts for difference (CFDs). These include limits on leverage, a duty to close a position when the margin runs too low and protection against losing more than you put in.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 18 October 2026.