The Comparison between futures contract and option contract and also explain that portfolio risk which can be modified by both. Introduction: When the commodities are buying or selling at a predetermined value but for the future time this dealing is called future trading but call option provides a right to the buyer. If the trading conditions are not profitable then he will not exercise the option price.

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Chapter 22, Problem 3CP

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To explain: The Comparison between futures contract and option contract and also explain that portfolio risk which can be modified by both.

Introduction: When the commodities are buying or selling at a predetermined value but for the future time this dealing is called future trading but call option provides a right to the buyer. If the trading conditions are not profitable then he will not exercise the option price.

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a) Futures contracts and options on futures contracts can be used to modify risk.Required:Identify the fundamental distinction between a futures contract and an option on a futures contract and explain the difference in the manner that futures and options modify portfolio risk

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