The right to sell a futures contract at a specific price is known as:

The right to sell a futures contract at a specific price is known as:

• A. A call option
• B. A put option
• C. A futures option
• D. A cash option

Answer: (B)

This question hinges on understanding what a put option represents in the world of futures. A put option on a futures contract gives the holder the right, but not the obligation, to sell the futures contract at a predetermined price. That exact ability to sell at a specific price is what the term “put” captures. A call option would give the right to buy the futures contract at the strike price, not to sell. A futures option is a broader category that includes both puts and calls, so it doesn’t specify the selling-right. A cash option isn’t a standard term in this context. So the correct concept is a put option.

This question hinges on understanding what a put option represents in the world of futures. A put option on a futures contract gives the holder the right, but not the obligation, to sell the futures contract at a predetermined price. That exact ability to sell at a specific price is what the term “put” captures. A call option would give the right to buy the futures contract at the strike price, not to sell. A futures option is a broader category that includes both puts and calls, so it doesn’t specify the selling-right. A cash option isn’t a standard term in this context. So the correct concept is a put option.