1) Which one of the statements about margin requirements on option positions is not correct? The...

1) Which one of the statements about margin requirements on option positions is not correct?

		The margin required will be lower if the option is in the money.
		A buyer of a put or call option does not have to post margin.
		If the required margin exceeds the posted margin, the option writer will receive a margin call.
		Even if the writer of a call option owns the stock, the writer will have to meet the margin requirement in cash.

A futures call option provides its holder with the right to ___________.

		purchase a futures contract for the delivery of options on a particular stock
		purchase a futures contract at a specified price for a specified period of time
		deliver a futures contract and receive a specified price at a specific date in the future
		purchase a particular stock at some time in the future at a specified price

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Expert Solution

1) Which one of the statements about margin requirements on option positions is not correct?

		The margin required will be lower if the option is in the money. This statement is not correct. The margin required will be higher if the option is in the money
		A buyer of a put or call option does not have to post margin. Correct because their risk is limited to the option premium paid.
		If the required margin exceeds the posted margin, the option writer will receive a margin call. Correct.
		Even if the writer of a call option owns the stock, the writer will have to meet the margin requirement in cash. Yes, the margin requirement has to be in cash even though a call option writer owns the stock.

A futures call option provides its holder with the right to purchase a futures contract at a specified price for a specified period of time. Option B is correct

		purchase a futures contract for the delivery of options on a particular stock. Incorrect because the underlying asset is the futures contract not options.

		deliver a futures contract and receive a specified price at a specific date in the future. Incorrect because the holder gets the right to purchase not deliver the futures contract.
		purchase a particular stock at some time in the future at a specified price. Incorrect because the underlying asset is not stock but futures contract.

jeff jeffy answered 1 year ago

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