What is one advantage of using options over futures?

One significant advantage of using options over futures is that options provide rights without obligations. When an investor purchases an option, they acquire the right to buy or sell an underlying asset at a predetermined price before a specified expiration date. This means that the investor has the flexibility to choose whether or not to exercise that right based on market conditions. If the market moves against their position, they can simply let the option expire without any obligation to execute the trade.

In contrast, futures contracts obligate the buyer to purchase and the seller to deliver the underlying asset at a set price on the expiration date. This obligation can lead to greater risk, especially if the market moves unfavorably after entering the contract. The non-obligatory nature of options allows traders to hedge their investments or speculate on price movements while limiting their potential losses to the premium paid for the option. This inherent flexibility makes options an attractive choice for many investors.

The other options do not accurately represent the comparative advantages of options over futures. For example, while options can be more expensive than futures, this is not a definitive advantage. Options do not eliminate all risk, as there is still the chance of losing the premium paid if the option is not exercised. Lastly, while some may find options to