An option buyer:
A) has a greater insurance benefit than the purchaser of a futures contract.
B) will generally incur a lower cost compared to a purchaser of a futures contract.
C) is purchasing a very risky instrument if they don't own the underlying asset as they are locked in to buying at expiration.
D) carries the risk of unfavourable price movements.

Question

Quizplus · Accepted Answer

Option buyers have the right, but not the obligation, to buy or sell an asset at a predetermined price, providing a form of insurance against price movements. Unlike futures contracts, where the buyer is obligated to buy or sell the asset, options offer more flexibility and protection.

An Option Buyer