A major difference between options and futures is that:
A) Options provide a symmetric risk/reward relationship.
B) Futures provide a symmetric risk/reward relationship.
C) Options provide an asymmetric risk/reward relationship.
D) Futures provide an asymmetric risk/reward relationship.
E) b and c only.

Question

Quizplus · Accepted Answer

Options provide an asymmetric risk/reward relationship because the buyer has the right but not the obligation to execute the option, leading to a potential for unlimited gains with limited loss (the premium paid). Futures, on the other hand, offer a symmetric risk/reward relationship because both gains and losses can be unlimited, and both parties are obligated to fulfill the contract at the specified price and date.

A Major Difference Between Options and Futures Is That