Risk, a common feature of any investment which paves way to a new financial instrument which are known as derivatives. Derivatives are those instruments, which does not have any value of its own, but derives value from an underlying asset. The underlying asset can be Commodities, gold, stock, index etc. The last two to three decades have witnessed many changes in the area of trade and commerce prior to New Economic Policy and globalisation, which has led to rapid and unpredictable variations in the assets price, interest rates and exchange rates, thus exposes the individuals, corporate world and economy to an unpredictable and multidimensional level of risks. Moreover, the element of risk in the avenues are unavoidable, rather its effect can be minimized. Here comes the role of derivatives to hedge and manage risk, an effective and less costly solution to the problem of risk. As human beings most investment decisions are irrational, there comes to analyse the bias they have while making investment which can be either cognitive on the basis of thoughts or can be emotional or affective on the basis of feelings. The researcher takes into account four cognitive biases such as, Herd behaviour, Conservatism, Availability bias and Over confidence bias to analyse the trading behaviour of individual investors.