The difference between a put option and a short position in a futures contract lies in the obligations to fulfill the said contract. They would only lose the money for the right to exercise contract power. With a put option, the obligations to fulfill a contract are not necessary to follow should say contract be not in their favor. At the same time, should the stock prices go down, the buyer has the opportunity to exercise the contract and profit for as long as the price allows for it. It is similar to a short position in that regard. The short position option, at the same time, does not allow to bail out of an unprofitable contract, which means that there is no limit to potential losses suffered by the owner of a short call option. In the event of stock prices going down, the benefits provided by a short position and a put option are similar.
Explain the difference between a put option and a short position in a futures contract.
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Academic.Tips. (2022) 'Explain the difference between a put option and a short position in a futures contract'. 24 November.
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Academic.Tips. (2022, November 24). Explain the difference between a put option and a short position in a futures contract. https://academic.tips/question/explain-the-difference-between-a-put-option-and-a-short-position-in-a-futures-contract/
References
Academic.Tips. 2022. "Explain the difference between a put option and a short position in a futures contract." November 24, 2022. https://academic.tips/question/explain-the-difference-between-a-put-option-and-a-short-position-in-a-futures-contract/.
1. Academic.Tips. "Explain the difference between a put option and a short position in a futures contract." November 24, 2022. https://academic.tips/question/explain-the-difference-between-a-put-option-and-a-short-position-in-a-futures-contract/.
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Academic.Tips. "Explain the difference between a put option and a short position in a futures contract." November 24, 2022. https://academic.tips/question/explain-the-difference-between-a-put-option-and-a-short-position-in-a-futures-contract/.
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"Explain the difference between a put option and a short position in a futures contract." Academic.Tips, 24 Nov. 2022, academic.tips/question/explain-the-difference-between-a-put-option-and-a-short-position-in-a-futures-contract/.