What is the essential difference between an option and a futures contract?
A) An option transaction occurs now, while a futures contract takes place in the future.
B) An option transaction is a right to transact for the option holder, while a futures contract is an obligation to transact in the future.
C) An option transaction is not standardized, while a futures contract is standardized.
D) An option transaction deals with financial assets, while a futures contract deals with commodities.

Question

Quizplus · Accepted Answer

The essential difference between an option and a futures contract is that an option transaction is the right to transact for the option holder, while a futures contract is an obligation to transact in the future. Options provide the holder with flexibility, while futures contracts require delivery of the underlying asset at a certain price and time.

What Is the Essential Difference Between an Option and a Futures