One of the biggest differences between a futures option and a futures contract is that
A) the option limits the loss exposure to the price of the option.
B) the futures contract limits the loss exposure to the price of the contract.
C) an option can be traded on the secondary market, whereas a futures contract cannot.
D) a futures contract can be traded on the secondary market, whereas an option cannot.

Question

Quizplus · Accepted Answer

The key difference between a futures option and a futures contract is that buying an option gives the holder the right, but not the obligation, to buy or sell an asset at a set price, limiting the potential loss to the price paid for the option. In contrast, a futures contract obligates the buyer to purchase, and the seller to sell, the underlying asset at a predetermined price, potentially exposing both parties to unlimited loss or gain.

One of the Biggest Differences Between a Futures Option and a Futures