Double Hedging

finance a la shmoop what is a derivative? well it's derived it's a something taken

from something else like a derivative of hot weather is thirst a derivative of [Girl takes sip of glass of water on a beach]

hunger is well you know crankiness that's diva thing you get there...

derivative of a 1/32 quarterback rating in the NFL is like serious wealth yeah

yeah discount double shmoop yeah look for it be on there with aaron

and a derivative of a stock or bond or other security is a something which

derives its value based on the performance of that underlying security

there are basically two flavors of derivative put options ie the right to [Ice cream flavors appear]

sell a security at a given price over a given time period and a call option, ie

right to buy a security at a given price over a given time period

well the price of that option is derived from the price of the security and a few

other factors like strike prices and duration and all that stuff

colonel electric the downgraded new version of General Electric is trading [Colonel Electric appears in a suit]

for 25 bucks a share a derivative of its share price is sold in the form of a

call option with a $30 strike price expiring about 90 days from now on the

third Friday of the end of that month well investors pay a price albeit

probably a small one for the right to then pay 30 bucks a share for colonel [Call option appears for colonel electric]

electric at any time in the next 90 ish days until that option expires making the bet

that the stock will go well above 30 bucks a share in that time period that

call option is thus a derivative of the colonel electric primary stock price got

it if you really want to get personal well here's the ultimate form of

derivative [Baby laying down]