1
vote
2answers
145 views

What would the broker do about this naked call option?

Let's say there is a stock of ABC currently at $8, and I sell a (naked) call option on it, with a strike price of $10 and expiration in two months. Suppose my broker lets me do this if I have 50% of ...
6
votes
2answers
290 views

Do the proceeds from selling an option immediately convert to buying power in a margin account?

In a cash account, the proceeds from the sale of any security will be held until settlement; for options, this is effectively overnight. One can sell an option on one day, and then use the funds the ...
4
votes
3answers
224 views

Margin when entered into a derivative contract

From Wikipedia In finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty (most often their ...
3
votes
2answers
195 views

Can you write a put option without sufficient funds to meet the potential obligation?

When writing a put option does your account have to be funded so that if the buyer exercises the right to sell you can meet your obligation, or can you write the put option without the funds to meet ...
3
votes
2answers
232 views

Rules for Broker Behavior with Covered Calls

When selling covered calls, there are a couple of things a broker could do if the stock has a sharp increase. Here's an example: Buy Stock: $100 Sell Call $120@1month: $1 Two days later, the stock ...