Recent investment inflows through the capital and money market has begun to stimulate the Indonesian economy. New investment instruments are offered by the capital market for the purpose of accomodating investor's risk dan return preferences. Besides stocks and bonds as the primary securities in the capital market, the Indonesian government also issued long-term bonds as its means to obtain capital funds from investors. Derivative securities, such as options and futures, are contractual agreement between two parties to deliver and purchase some specified amount of financial assets or commodity at a specified date and specified price. Option contracts give its holder the right, not the obligation, to do something; while futures contract obligates the transacting parties to perform or fulfill the contract agreement. This paper discusses definition, terminologies related to derivative, profit profile and the use of derivative instruments in the company's hedging strategy. It is essential to note that companies may use different underlying instruments to hedge, such as commodities, gold, stock index, interest rate, and currency.