Introduction:- The objective of an investment decision is to get required rate of return with minimum risk .To achieve this objective, various instruments have been developed in recent past.At present the Indian stock markets are not having any risk hedged instruments that would allow the investors to manage and minimize the risk. In industrialized countries apart from money market and capital market securities, a variety of other securities known as ‘derivatives’ have now become available for investment and trading. The derivatives originate in mathematics and refer to a variable which has been derived from another variable. A derivative is a financial product which has been derived from another financial product or commodity. The derivatives do not have independent existence without underlying product and market. Derivatives are contracts which are written between two parties for a easily marketable assets. Derivatives are also known as deferred delivery or deferred payment instruments.