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futures and options markets

R

Robert

Very Active Member
Which of the following investors in the futures and options markets can never find that the contract is a liability at expiry?

A the seller of the future contract
B the buyer of a put option
C the writer of a call option
D the buyer of a future contract

Can I know why the answer for this question is C ? What is the meaning of liability at expiry? Can you further elaborate on the future and option market ?
 
Hi

The answer is B (not C), which might explain your confusion?

We know that a future is an obligation to both buyer and seller. The contract will result in a gain to one and a liability to the other.

An option won't be a liability to the party with the choice (ie the buyer), but could be a liability to the party without the choice (ie the seller or writer).
 
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