Which two of the following are key differences between an option contract and a forward contract?
I.option contracts can be resold but forward contracts cannot
II.the option price is determined at settlement while the forward price is determined when the contract is initiated
III.the rights and obligations of the buyer
IV.cost when contract initiated
A)I and III only
B)II and IV only
C)III and IV only
D)I and II only
E)II and III only

Question

Quizplus · Accepted Answer

Option contracts give the buyer the right but not the obligation to execute the contract, while forward contracts involve obligations for both parties. Additionally, options require a premium paid upfront, whereas forwards typically do not require an upfront cost.

Which Two of the Following Are Key Differences Between an Option