Understand the risk and benefits of futures options
Victor Aideyan, Senior Risk Management Consultant with HISGRAIIN Commodities Inc., discusses the risks and benefits of buying or selling options on a futures contract.
- 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 must pay.