What is the cash component of the payoff if a call futures option on 50 units of the underlying asset is exercised? (A) (Current Futures Price - Strike Price) times 50 (B) (Strike Price - Current Futures Price) times 50 (C) (Most Recent Futures Settlement Price - Strike Price) times 50 (D) (Strike Price - Most Recent Futures Settlement Price) times 50
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In the case of a futures option, the current price is the most recent futures settlement price. Therefore, the cash component of the payoff is (Most Recent Futures Settlement Price - Strike Price) times 50. Show more…
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