Question

What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract? Do they have any risk for the investors?

Answer 1

Ans:

Long position in future has obligation to buy and sell it position after expiry or rollover upto maximum 3 months from current contract expiry then sell it. Whatever is the price difference that will be loss or gain.

But in case of long position in option has no obligation because option buyer has right to choose the option he would buy or not. If he don't buy or exercise it then his loss will be limited to premium only.

Main risk associated with future long is there has huge chance of making big loss as loss can not be mitigated without hedging where option long make loss limited if price goes against buying price.