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).
