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