Victor Aideyan, Senior Risk Management Consultant with HISGRAIIN Commodities Inc., discusses the risks and benefits of buying or selling options on a futures contract.
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- Options give you the right, but not the obligation, to buy (call option) or sell (put option) a futures contract.
- Options have a premium and you need to weigh the value of the premium against the possible increase or decrease in futures prices.
- Regardless of an increase or decrease, your maximum risk is the premium you have to pay.