Series 7 practice questionmediumOptions — Margin Requirements
Which of the following options positions requires a margin account?
- ABuying a call option
- BBuying a put option
- CWriting a covered call while owning the stock
- DWriting an uncovered put option✓ Correct answer
Explanation
Why D — Writing an uncovered put option
Writing uncovered options (both calls and puts) requires a margin account because of the substantial risk involved. Buying options and writing covered calls can be done in cash accounts. The margin requirement for uncovered options includes the premium plus a percentage of the underlying stock's value.
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