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Options are the most common equity derivatives but there are many other types of equity derivatives which are outside the purview of this article.
Equity options provide right but not the obligation to trade a quantity of stock at a set price at a time in the future. Most investors gain exposure to the equity markets by using options and these can be done on single stocks, a customized group of stocks or on an index of stocks.
Options in the Equity Market:
- Stock market index futures: These are futures contract that are used to replicate the performance of an underlying market index. They can be used for hedging against an existing equity position or speculating on the movement of the index in the future.
- Equity basket derivatives: Are also futures, options or swaps. Here is underlying is a non-index basket of shares and they have characteristics that are similar to equity index derivatives. However, they can be traded over-the-counter as the definition of basket is not standardized the way an equity index is.
- Single stock futures: These are exchange traded futures contracts and are based on an individual underlying security instead of a stock index. Investors who hold single stock futures for long period of time do not receive dividends while the holders of short positions do not pay dividends.
- Equity index swaps: These are an agreement between two parties to swap two sets of cash flows on a date which is pre-determined for an agreed number of years. These options in the equity market are considered to be quite cost effective.
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The US equity markets is considered to be the deepest and most liquid equity markets in the world. This has resulted in making the US equity markets very attractive to foreign issuers who are looking to consolidate their position in the US through public offerings in the US equity markets. 
