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Explain what we mean by implied volatility and how options speculators can use their forecast of volatility to make a potential profit from their options
Explain what we mean by implied volatility and how options speculators can use their forecast of volatility to make a potential profit from their options positions. Explain the risks in this trade and how these risks might be mitigated.
b) Explain why various margin requirements are required for a written call option but not for a long call option, whereas for futures contracts, margin requirements have to be provided by traders who hold either a long or a short position.
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