The price paid for the right but not the obligation to buy or sell a futures contract is called what?

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Multiple Choice

The price paid for the right but not the obligation to buy or sell a futures contract is called what?

Explanation:
Paying the premium buys the right, not the obligation, to enter into a futures contract at a set price. This premium is the price of an option on the futures and reflects the potential value if the futures move in a favorable direction before the option expires. It’s separate from a broker’s commission (the fee to execute the trade), the margin (the collateral to hold a futures position), and a quote (the current price of the futures itself). In short, the premium is the cost of purchasing the option that grants the right to trade the futures.

Paying the premium buys the right, not the obligation, to enter into a futures contract at a set price. This premium is the price of an option on the futures and reflects the potential value if the futures move in a favorable direction before the option expires. It’s separate from a broker’s commission (the fee to execute the trade), the margin (the collateral to hold a futures position), and a quote (the current price of the futures itself). In short, the premium is the cost of purchasing the option that grants the right to trade the futures.

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