What Is the Essential Difference Between an Option and a Futures

question 8

Multiple Choice

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

• A) An option transaction occurs now, while a futures contract takes place in the future.
• B) An option transaction is a right to transact for the option holder, while a futures contract is an obligation to transact in the future.
• C) An option transaction is not standardized, while a futures contract is standardized.
• D) An option transaction deals with financial assets, while a futures contract deals with commodities.

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Definitions:

Conditional Probabilities

The probability of a specific event happening after another event has already taken place.

IUPAC

The International Union of Pure and Applied Chemistry, an organization that sets standards for naming chemical compounds.

Compound

A mixture resulting from the chemical combination of two or more elements in exact proportions.

Anisole

A colorless liquid organic compound, essentially methoxybenzene, used in perfume and flavoring.