The literature extensively explores the determinants of firms' utilization of financial derivatives; however, there remains a notable gap in understanding the influence of managerial characteristics on this decision-making process. In this study, we investigate how one important managerial characteristic, namely managerial ability, affects firms' financial derivatives usage. We empirically study this question in the context of China, a pivotal emerging market on the global stage. Through analysis of a dataset comprising Chinese-listed firms spanning the period from 2009 to 2019, our findings reveal a positive correlation between managerial ability and the usage of financial derivatives. The results remain consistent and robust to a battery of endogeneity and alternative specification tests. Mediation analysis indicates that the association between managerial ability and financial derivatives usage is driven by both information processing capacity and managerial overconfidence. Furthermore, the increment in financial derivatives usage, linked to higher managerial ability, also correlates with increased firm risk. Cross-sectional analyses suggest that strong monitoring reduces the excessive use of financial derivatives by high-ability managers. Finally, we provide evidence that the increased use of financial derivatives is associated with lower firm value. Our findings indicate that although both information processing ability and managerial overconfidence contribute to the positive association between managerial ability and financial derivatives utilization, the influence of managerial overconfidence predominates, thereby exacerbating adverse outcomes for firms. This study contributes to the comprehension of the influence of managerial ability on firms' financial derivatives usage and presents some novel evidence concerning the adverse consequences associated with high managerial ability on firm outcomes, a dimension previously under-explored in literature.