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.
• b) Options trading involves an unlimited risk, whereas the potential loss on the purchase of a futures contract is defined and limited.
  No. The most you can lose on an options purchase is the premium you paid for the option, a limited amount.

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