Speculation in interest rate futures differs from speculating with interest rate options in that interest rate options:

Question

Quizplus · Accepted Answer

Interest rate options limit downside risk to the premium paid for the option (A), and they also reduce the upside potential by the amount of the option price (B). Options provide a right without an obligation to buy or sell, which inherently limits the downside to the premium paid while allowing for gains, albeit reduced by the cost of the option itself.

Speculation in Interest Rate Futures Differs from Speculating with Interest