Options differ from futures contracts in that an option is an obligation on both parties whilst a futures contract is only an obligation on the writer.

Question

Quizplus · Accepted Answer

This statement is incorrect. A futures contract is an obligation on both parties to fulfill the contract, while an option gives the buyer the right but not the obligation to buy or sell an asset at a predetermined price. The seller of an option has an obligation if the buyer chooses to exercise their right, but the buyer has the choice.

Options Differ from Futures Contracts in That an Option Is