OSB options on futures offer many advantages to hedgers and speculators alike. Choice is the main feature of an option. For the right granted by the option contract, you pay a sum of money known as premium to the option seller. The writer must fulfill the contract terms if it is exercised by you, the buyer. Expire - You can let the option expire without any commitment or delivery obligation.
Hedgers buying options also have limited loss, but unlimited gain potential.
There are two types of options, calls and puts , which offer opposite pricing alternatives. A call option gives the buyer the right to buy a futures contract at a fixed price level on or before an expiration date. A put option gives the buyer the right to sell a futures contract at a fixed price level, on or before an expiration date. Calls - These increase in value if prices rise, and decrease in value if prices fall. Puts - These increase in value if prices fall, and decrease in value if prices rise.