In a derivative or futures market, the underlying refers to the security or commodity on which the price of the contracts being traded are dependent.

If you have a futures contract for buying ten thousand pounds of coffee in july 2001, coffee is the underlying. If you have an option to purchase 500 shares of CSCO at $30 per share, CSCO shares are the underlying.

Un`der*ly"ing (?), a.

Lying under or beneath; hence, fundamental; as, the underlying strata of a locality; underlying principles.

 

© Webster 1913.

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