Suppose you and I agree I'm going to buy an ERC20 token from you for X ether. You sign a transaction committing to the exchange, and then I look at the price and realize ether's value has gone down, so I no longer like the deal. I have the "free option" of simply not signing.

Note that I'll sign if the deal has gotten more favorable to me, and I'll refuse to sign if it's gotten less favorable. This gives me an advantage over you because you signed first and thus committed yourself already.

Suppose you and I agree I'm going to buy an ERC20 token from you for X ether. You sign a transaction committing to the exchange, and then I look at the price and realize ether's value has gone up, so I no longer like the deal. I have the "free option" of simply not signing.

Note that I'll sign if the deal has gotten more favorable to me, and I'll refuse to sign if it's gotten less favorable. This gives me an advantage over you because you signed first and thus committed yourself already.