Question
In question 1 and 2 assume that the initial margin requirement for writing a naked options is the premium plus 20% of the stock value
In question 1 and 2 assume that the initial margin requirement for writing a naked options is the premium plus 20% of the stock value plus any necessary adjustments for not being at the money. Also assume the margin requirement for stock is 50%
1. An investor buys a naked call option . The option price is $4 at a strike price of $50 and a stock price of $52. What is the investor's net cash outflow when entering into this trade?
A. 4
B. 50
C. 400
D. 1040
E. 1440
2. An investor writes a naked call option. The option price is $4 at a strike price of $50 and stock price of $52. What is the investor's net cash outflow when entering into this trade?
A. 50
B. 400
C. 520
D. 1040
E. 1440
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