Underlying assets are the financial instruments that define the price of a derivative, and as such the profit or loss from a derivative trade such as a spread bet or CFD. Underlying assets can comprise shares, indices, commodities, currencies, bonds, options or ETPs.
When you trade a derivative, you are speculating on the price movement of the derivative’s underlying asset, which is often known as the market. If you correctly predict that the underlying asset will increase in value, the trade will result in profit. If you predict that it will increase in value and its value subsequently drops, the trade will result in a loss.