What Is the Biggest Difference Between an Option and a Futures

question 73

Multiple Choice

What is the biggest difference between an option and a futures contract?

• A) Options are traded on exchanges, whereas futures are not.
• B) Options give investors a way to manage portfolio risk, while futures do not.
• C) Options can be used by speculators to profit from price fluctuations, while futures cannot.
• D) Options give their holders the right to buy or sell, whereas futures contracts are obligations to buy or sell.

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Definitions:

Left Side

In accounting, this refers to the debit side of a double-entry bookkeeping system, indicating increases in assets or expenses and decreases in liabilities or equity.

Debit Side

The left side of an accounting ledger where increases in assets and expenses or decreases in liabilities and equity are recorded.

Normal Balance

The side of an account (debit or credit) where increases in the account are recorded, reflecting the account's usual positive balance.

Expense

Outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major operations.