Stocks represent real ownership in a company. Derivatives, on the other hand, are contracts based on the price of an underlying asset such as stocks, commodities or bonds. If you want to invest in derivatives or stocks, you should understand the differences carefully, especially in terms of rights, risks and their actual purpose. In this overview, we explain exactly what stocks and derivatives are and how they differ from each other.
Explanation: Stocks are by definition equity in a company, while derivatives such as warrants, certificates or futures are contracts based on the price of an underlying product.
Real ownership: With stocks, you hold a security representing a stake in a company; with derivatives, you don't own any part of the underlying asset.
Shareholder rights: Stocks can give you voting rights and dividends as a shareholder, whereas derivatives offer no say in the matter.
Risk profile: Derivatives can fluctuate sharply due to leverage, while the risk of loss with stocks is limited to the invested capital.
Definition: what are stocks and derivatives?
Stocks and derivatives are among the most well-known financial instruments on the market. However, they differ significantly. Stocks are securities that represent a stake in a company. When you buy a stock, you are directly participating in the company's value. The stock price reflects the company’s economic performance.
Derivatives, on the other hand, are contracts whose price is derived from the value of an underlying asset. This underlying asset can be a stock, a bond, a commodity or another asset. Derivatives allow you to speculate on price changes without buying the asset itself.
The difference between stocks and derivatives lies mainly in their structure:
Stocks = direct stake in the company
Derivatives = contract based on the price of an underlying product
Ownership
A fundamental difference between stocks and derivatives is ownership. This means that when you buy a stock, you own part of the company. You're a shareholder and benefit directly from the company’s economic success. This shows up, for example, through possible dividends or your voting rights on key decisions.
With derivatives, it’s different. You’re not buying a stake, but a contract. This refers to the price of an underlying asset, such as a stock, a commodity or a bond. You're betting on price movements without owning the underlying asset. Derivatives include warrants, futures or swaps. However, they do not give you ownership rights. You're not involved in the company but are speculating on the price development of the underlying asset.
Stocks – ownership:
you hold a real stake in the company
you are officially registered as a shareholder
Derivatives – no ownership:
you do not own any part of the underlying asset
you hold a contract on its price development
What are warrants, futures and swaps?
These terms often appear in connection with derivatives. All three are types of derivatives and relate to the price of an underlying asset, not ownership of the asset itself.
Warrant: A contract giving you the right to buy or sell an underlying asset at a certain price, but only within a set time frame and without ownership until exercised.
Future: A binding contract between two parties to trade an underlying asset at a fixed price and date, without ownership being transferred upfront.
Swap: An exchange contract in which, for example, interest payments or currencies are swapped between two parties, but you never own the underlying asset.
Rights
By buying certain stocks, you gain specific rights with respect to the company. These include voting rights at annual general meetings. There, investors can vote on key issues such as business strategy, board composition or dividend policy. You're also informed about corporate actions, such as capital increases or stock splits, and may even have some say in them.
Derivatives don’t offer these rights. They are contracts based on price development, without any legal connection to the issuer of the underlying asset. As a derivative holder, you have no influence, no voting rights and no insight into company-related events. The focus is purely on the price of the underlying, not its structure or management.
Risks
The risks differ significantly depending on whether you use stocks or derivatives. Derivatives are often considered more speculative because they're often designed for short-term price movements. However, some derivatives are used for longer-term strategies or for hedging. With stocks, the risk is generally more directly tied to the company and easier to assess, especially for long-term investors.
Risks of derivatives
Even small price movements can cause large losses
In certain leveraged products, you can lose more than you invested, e.g. with futures involving margin calls
Some derivatives can lose all their value
Derivatives are often harder to understand than stocks, which can lead to mistakes
You might not be able to sell the derivative at your preferred time
Risks of stocks
The value can drop if the company performs poorly
Economic or political events can also affect the price
Investing in just one or a few stocks carries higher risk
Even with long-term investments, losses are possible
Purpose
Stocks are typically bought to take part in a company’s long-term growth. Many investors buy them to receive regular dividends and build wealth. Derivatives, on the other hand, are more flexible financial instruments mainly used for short-term strategies, speculation or hedging. They are more frequently traded by experienced investors looking to respond to price movements in the underlying asset.
Why real stocks are advantageous for long-term investing
If you're investing for the long term, you’ll often focus on companies with a real business model. That's exactly what stocks offer. Holding stocks on the stock exchange means you're directly involved—not just through a financial product, but through real ownership. The price and value depend on the company itself. You’re not investing in a contract but in what lies behind it: real business models, revenue and strategies.
Many investors consciously choose against derivatives. They don’t want to replicate an underlying asset but to participate directly in a company's value—without leverage risks or needing to monitor contract terms.
What makes real stocks attractive long-term:
You invest in companies, not just in price movements
Your price gains reflect the company’s actual performance
You don’t need to understand or manage complex derivative structures
Stocks instead of synthetic products: investing with Bitpanda
Many providers rely on synthetic financial products, where you do not invest directly in a stock but only participate in its price performance. With Bitpanda, it’s different: you invest in real stocks, which are held in custody in line with applicable regulatory requirements.*
Even when you choose fractional shares, you are proportionally invested in the company. This means you participate directly in the value development of real companies, without synthetic structures or derivative financial products.