Definition 1.
Options on futures are contracts giving the holder the right to buy or sell a specified futures contract at an agreed-upon price before a specific expiration date. If things go your way, you can exercise the option, buy the futures and turn a handsome profit. If you guess wrong, you can let the option expire. In that case, all you would lose would be the price you paid for the option: You wouldn''t be responsible for the much bigger losses on the futures.
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