Series 7 practice questioneasyOptions — Approval Levels
Which options strategy typically requires the highest level of account approval?
- ABuying calls
- BCovered call writing
- CWriting uncovered (naked) options✓ Correct answer
- DBuying protective puts
Explanation
Why C — Writing uncovered (naked) options
Writing uncovered (naked) options requires the highest approval level because of the potentially unlimited risk involved. Firms typically have multiple approval levels, with buying options and covered writing at lower levels, and uncovered writing at the highest level due to its significant risk profile.
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