Ted Purchased a Futures Option on Cotton with a Strike

question 282

Multiple Choice

Ted purchased a futures option on cotton with a strike price of 51. If Ted exercises this option, he will receive:

• A) A futures contract on cotton.
• B) Cash equal to the difference between the current futures price and the strike price of cotton.
• C) Cash equal to the difference between the futures pre-specified price and the strike price of cotton.
• D) A futures contract on cotton and will pay the difference between the current futures price and the strike price of cotton.
• E) A futures contract on cotton plus cash equal to the difference between the current futures price and the strike price of cotton.