If you buy an option to sell Treasury futures at 115,and at expiration the market price is 110,
A) the call will be exercised.
B) the put will be exercised.
C) the call will not be exercised.
D) the put will not be exercised.

Question

Quizplus · Accepted Answer

The scenario described is an example of a put option. The buyer of a put option has the right, but not the obligation, to sell the underlying futures contract at the strike price stated in the option. In this case, the strike price is 115. Since the market price of the Treasury futures is 110 at expiration, the buyer of the put option can exercise their right to sell the futures contract at the higher strike price of 115. This allows them to realize a profit on their option, as they can sell the futures contract at a higher price than the current market price. Therefore, the most appropriate choice is B), the put will be exercised.

If You Buy an Option to Sell Treasury Futures at 115,and