The major advantages of futures options over futures contracts include
I. positions can be hedged with a smaller commitment of capital.
II. potential losses are limited to the size of the contract.
III. greater leverage and the potential for higher percentage returns.
IV. a greater variety of commodities is available for speculating or hedging purposes.
A) II, III and IV only
B) I and III only
C) I, II and IV only
D) I, II, III and IV

Question

Quizplus · Accepted Answer

I and III are correct because futures options require a smaller upfront investment compared to futures contracts, offering greater leverage and the potential for higher returns. Potential losses for options holders are limited to the premium paid, not the size of the contract.

The Major Advantages of Futures Options Over Futures Contracts Include