One distinguishing difference between the buyer of a futures contract and the buyer of an option contract is that the futures buyer:
A) pays a much higher premium than option buyers.
B) has an obligation to purchase, not a choice.
C) can lose no more than the initial premium.
D)has increased rather than reduced risk.

Question

Quizplus · Accepted Answer

The buyer of a futures contract has an obligation to purchase the underlying asset at the agreed upon price and time, while the buyer of an option contract has the choice (but not the obligation) to purchase or sell the underlying asset. Therefore, the futures buyer has a different level of obligation than the option buyer.

One Distinguishing Difference Between the Buyer of a Futures Contract