Ethereum derivatives are contracts that derive their value from the price of Ethereum. The most common type of Ethereum derivative is a futures contract, which is an agreement to buy or sell a certain amount of Ethereum at a specific price at some point in the future.
Other types of Ethereum derivatives include options and swaps.
Ethereum derivatives can be used to hedge against risk or to speculate on the future price of Ethereum. For example, if you think the price of Ethereum is going to go up, you could buy a futures contract agreeing to buy ETH at a higher price in the future. If the price of ETH goes up as you expect, you can make a profit on your trade.
Similarly, if you think the price of ETH is going to go down, you could sell a futures contract agreeing to sell ETH at a lower price in the future. If the price of ETH goes down as you expect, you can again make a profit on your trade.
Options and swaps are more complex types of Ethereum derivatives that are used mostly by institutional investors and traders. Options give the holder the right but not the obligation to buy or sell ETH at a certain price, while swaps are agreements to exchange one asset for another at some point in the future.
Ethereum derivatives can be traded on regulated exchanges like CBOE Futures Exchange (CFE) and Chicago Mercantile Exchange (CME), as well as on unregulated exchanges like BitMEX.