The choice between futures and options
A)depends on whether the underlying instrument is a debt instrument or an equity.
B)reflects a trade-off between the higher cost of using options and the extra insurance benefits that options provide.
C)reflects a trade-off between the higher cost of using futures and the extra insurance benefits that futures provide.
D)reflects a trade-off between the greater risk from using options and the extra insurance benefits that options provide.

Question

Quizplus · Accepted Answer

The choice between futures and options often reflects a trade-off between the higher cost of using options (due to the premium paid for the option) and the extra insurance benefits that options provide (such as the right, but not the obligation, to buy or sell the underlying asset, which limits downside risk).

The Choice Between Futures and Options