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.

Question

Quizplus · Accepted Answer

Futures options allow for hedging with less capital (I) and offer greater leverage and potential returns (III). However, potential losses are limited to the premium paid, not the size of the contract (II is incorrect). The variety of commodities available is not necessarily greater with options (IV is incorrect).

The Major Advantages of Futures Options Over Futures Contracts Include