A put option on corn gives the holder the right to sell the futures contract at a fixed price. Which option describes this feature?

A put option on corn gives the holder the right to sell the futures contract at a fixed price. Which option describes this feature?

• A. The right to buy a futures contract at a fixed price
• B. The right to sell a futures contract at a fixed price
• C. The obligation to sell a futures contract
• D. The right to take delivery of corn

Answer: (B)

A put option on corn is the right, not the obligation, to sell the futures contract at a fixed strike price. That means the description “the right to sell a futures contract at a fixed price” is exactly what a put provides. The value of this put increases if the futures price falls below the strike, since you can still sell at the higher fixed price. This differs from a right to buy a futures contract (that would be a call) and from an obligation to sell (futures contracts themselves, not the option). It also isn’t about taking delivery of physical corn—the option on futures focuses on the price of the futures contract, not the actual corn delivery.

A put option on corn is the right, not the obligation, to sell the futures contract at a fixed strike price. That means the description “the right to sell a futures contract at a fixed price” is exactly what a put provides. The value of this put increases if the futures price falls below the strike, since you can still sell at the higher fixed price. This differs from a right to buy a futures contract (that would be a call) and from an obligation to sell (futures contracts themselves, not the option). It also isn’t about taking delivery of physical corn—the option on futures focuses on the price of the futures contract, not the actual corn delivery.