Sox 8 SO. “SieF ‘Commodity Options Amity Business School Faculty — Dr. Bandana Chadha Session 25-26 a Nin &Options * Deferred delivery contracts which * gives the buyer the right * but not the obligation * to buy or sell * aspecified underlying * at aset price (exercise or strike price) * on or before a specified date (expiration date) It gives the buyer unlimited upside potential but with limited downside risk /cost.Options Options? = Buyer has the right to buy/sell a commodity in the future = May exercise this right or let it lapse =" Maximum loss=premium paid Unlike a forward or futures contract: = There is no committed to buy/sell on buyer. = Option requires an up-front payment whereas Futures have margin.requirements.