Which of the following statements best describes the relationship between options and futures?
A)Futures limit both gains and losses, while options limit losses without limiting gains.
B)Options limit both gains and losses, while futures limit losses without limiting gains.
C)Futures contracts may be purchased on options contracts, but options cannot be bought on futures contracts.
D)Buyers of futures contracts must pay a futures premium, whereas buyers of options do not have to pay a premium.

Question

Quizplus · Accepted Answer

Futures contracts involve an obligation to buy or sell an underlying asset at a future date, while options contracts give the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price, known as the strike price. Because of the obligation aspect of futures, gains and losses are limited, whereas option holders can limit their losses without limiting their gains.

Which of the Following Statements Best Describes the Relationship Between