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Options were introduced in 1997 when liquidity was improving on dry cargo FFAs. They started with large European shipowners selling calls on forward positions on delivery of newbuildings.
Buying an option can be compared to buying insurance. The maximum loss that can occur is quantified by the premium that is paid.
Options prices are quoted at a level that option sellers believe compensates them for the risk of selling options. Sellers exchange an element of risk for a premium (the amount of money paid to the seller). Option sellers retain the premium and some specific obligations. That may be sufficient reason, but if they already own a position (for example shipowners long of tonnage), their risk is further offset by the underlying asset.
All options have finite lives. Most FFA options are European-averaged (or Asian) and are automatically settled at the end of the contract. No prior notification is required. An option is finally either settled in favour of the buyer or abandoned (with the seller retaining the premium).