One Distinguishing Difference Between the Buyer of a Futures Contract

question 29

Multiple Choice

One distinguishing difference between the buyer of a futures contract and the buyer of an option contract is that the futures buyer:

• A)Pays a much higher premium than option buyers
• B)Has an obligation to purchase, not a choice
• C)Can lose no more than the initial premium
• D)Has increased rather than reduced risk

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Definitions:

Negative

A term often used to describe values below zero, or more broadly, to indicate a refusal, denial, or the absence of a positive quality.

Independent Variable

A variable in an experiment or study that is manipulated or changed to observe its effect on a dependent variable.

Dependent Variable

The variable in an experiment or study that is assumed to depend on or be caused by another variable (the independent variable).