Derivatives-Based ETF Definition

Derivatives-Based ETF Definition

Learn the definition of derivatives-based etf and other ETF terminology from the glossary.

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Edited by: Staff

Learn more about Derivatives-Based ETFs

Derivatives-Based ETFs represent a subset of exchange-traded funds that employ financial derivatives, such as futures and options contracts, to achieve their investment objectives. These ETFs may seek to provide leveraged or inverse exposure, manage risk, hedge a particular asset or security, or implement specific investment strategies. The use of derivatives introduces additional complexities and risk factors, requiring investors to comprehend the intricacies of derivative instruments and their potential impact on the fund's performance. Derivatives-Based ETFs appeal to sophisticated investors looking for enhanced strategies beyond traditional passive indexing, emphasizing the importance of comprehensive understanding and careful risk management.

Related Terms

Futures, Leveraged ETF, Inverse ETF, Passive Management

ETF Glossary is’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.