Which of the following features are shared by futures contracts and options?
I.They have specified expiration dates.
II.Their value is derived from changes in the value of some other asset.
III.Unprofitable futures or options can simply be allowed expire unexercised.
IV.Futures contracts specify the price at which the commodity will be delivered at the expiration date.
A)I and II only
B)I and IV only
C)II and III only
D)I, II and III only

Question

Quizplus · Accepted Answer

Futures contracts and options both have specified expiration dates and their value is derived from changes in the value of some other asset. Unprofitable options can simply be allowed to expire unexercised, but unprofitable futures must be closed out by taking an offsetting position. However, futures contracts specify the price at which the commodity will be delivered at the expiration date, while options give the right but not the obligation to buy or sell at a specified price. Therefore, statement IV is specific to futures contracts and not applicable to options.

Which of the Following Features Are Shared by Futures Contracts