A currency futures option amounts to a derivative on a derivative.Why would something like that exist?
A)For some assets,the futures contract can have lower transaction costs and greater liquidity than the underlying asset.
B)Tax consequences matter as well,and for some users an option contract on a future is more tax efficient.
C)Transaction costs and liquidity
D)all of the options

Question

Quizplus · Accepted Answer

All of the options listed are reasons why a currency futures option, which is a derivative on a derivative, would be useful or necessary for certain users. Some assets may have lower transaction costs and greater liquidity through the futures contract than the underlying asset, and tax consequences can also be a factor for certain users. Ultimately, the transaction costs and liquidity of the futures contract, along with other potential advantages, may make a currency futures option an attractive choice for some market participants.

A Currency Futures Option Amounts to a Derivative on a Derivative.Why