Which of the Following Are Advantages of Using Options for Futures

question 63

Multiple Choice

Which of the following are advantages of using options for futures speculation?
I.increased leverage
II.Potential losses are limited to the cost of the option.
III.Options are available on a broad range of commodity, index, and currency futures.
IV.Investors avoid the possibility of having to take delivery of the commodity.

• A)I and II only
• B)II and III only
• C)I, II and IV only
• D)I, II, III and IV

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Definitions:

Direct Materials Costs

The cost of raw materials that can be directly traced to the production of a specific product.

Direct Labor Costs

Expenses associated with the wages of employees who are directly involved in the production of goods or services.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including but not limited to utilities, depreciation, and salaries of supervisory staff.

Depreciation

The allocation of the cost of a tangible asset over its useful life, reflecting the loss in value over time.