Futures and option contracts
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Explain the differences between futures and option contracts. Which derivative can be assessed "less risk"?
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The expert explains the differences between futures and option contracts.
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Please explain the differences between futures and option contracts. Which derivative can be assessed "less risk"?
A futures contract is an agreement between two parties to buy or sell a specified quantity and quality of asset at a certain time in future at a certain price agreed at the time of entering into the contract on the futures exchange.
A futures contract calls for delivery of an asset at a specified delivery or maturity date, for an agreed-upon price, called the futures price, to be paid on contract maturity. The trader taking the long position commits to purchasing the asset on delivery date. The trader taking the short position commits to delivering the asset at contract maturity.
An Option is the right but not the obligation of the holder, to buy or sell underlying asset by a ...
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