Chapter 02 · Section 2.1

Risk

We will now complete the following table:

                                       FUTURES        PURCHASED OPTIONS     
Risk (potential loss)                   .....           .....        
Margin Calls                            .....           .....   
Hedging Strategies                      .....           .....  
Price Protection                        .....           .....

• a) Futures trading involves an unlimited risk, whereas the potential loss on the purchase of an exchange-traded options contract is defined and limited.
  Yes. If the market continues to move against your futures position, you potential losses are unlimited. With options, the most you could lose is the price you have paid for the option, i.e. a limited amount. Continue
  b) Options trading involves an unlimited risk, whereas the potential loss on the purchase of a futures contract is defined and limited.

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