The Main Reason to Buy an Option on a Futures

question 86

Multiple Choice

The main reason to buy an option on a futures contract rather than buying the futures contract is ________.

• A) to reduce transaction cost
• B) to preserve the possibility for gains
• C) to limit losses
• D) to remove the possibility for gains

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Definitions:

Off-price Retailers

Stores that sell brand name and designer merchandise at lower prices than traditional retail outlets by taking advantage of overstock, last season's products, or bulk buying.

Inventory

The complete list of items such as property, goods in stock, or the contents of a building.

Irregulars

Products that have minor faults or variations from standard specifications, often sold at reduced prices due to these imperfections.

Production Overruns

Occurrences when more units of a product are produced than were originally ordered or forecasted, often leading to excess inventory.