Margin on Options

Question 1

Selling naked calls and puts can only be done in a ________

Answer 1

margin account

Question 2

Initial margin to sell naked options is _____ of underlying security MV, with a min margin of _____ of underlying MV

Answer 2

20%, then 10% minimum

Question 3

For long options, _____ of the premium must be deposited

Answer 3

100%

Question 4

For LEAPs, intial margin requirement is _____ of premium, then ______ if within 9 months of expiration

Answer 4

75%, then 100%

Question 5

For covered short calls, there is ______ margin requirement

Answer 5

no margin requirement - the short call is covered by the owned stock, so they just take the premiums received from selling the call

Question 6

For margin purposes, a short put is considered covered if the writer has a _____ in the same stock

Answer 6

short position

Question 7

The margin deposit on spreads is always the _____ potential loss for that position

Answer 7

maximum

Question 8

The most dramatic effect of the “portfolio” margin requirement is for _______

Answer 8

hedged stock positions

Question 9

to qualify for portfolio margin requirements, individuals must maintain min account equity of _____, institutions min account equity of ______

Answer 9

$100,000; $5,000,000

Question 10

To open a portfolio margin account, one must have the following:

Answer 10

• at least $100,000 in equity
• must be approved for uncovered options writing
• must receive a portfolio margin risk disclosure
• must sign the disclosure