Q:
Which TWO statements are TRUE about writing covered calls?
I. The maintenance margin requirement is 25%.
II. Physical delivery may be required upon exercise.
III. The writer has cash on deposit equal to the cost to purchase the shares from the option holder.
IV. It is a bearish strategy.
a) I and IV
b) II and III
c) II and IV
d) I and II
A:
The correct answer is c)
I is incorrect because there is no margin requirement.
III is incorrect because a call writer must have the shares on deposit. A put writer is required to have the cash equivalent.

MORE FAQS

  1. A margin account has a long market value of $12,000, a debit balance of -$6,000 ...

  2. Which of the following statements is(are) true with respect to the factors that a manager must take ...

  3. Under the Uniform Securities Act, registration with the Administrator as an investment adviser is required ...

  4. Which of the following are tools that are employed by the Federal Reserve in its efforts to control the money supply?

  5. If a sales representative moves from one broker-dealer to another ...

  6. Federal covered securities are subject to which of the following requirements ...

  7. Under the Uniform Securities Act, which of the following are defined as securities ...

  8. Which statement(s) is/are FALSE about market risk?

  9. What two components are used to calculate risk-adjusted return? I ...

  10. Money laundering has become a specific concern in all legitimate financial institutions worldwide ...

  11. Zero coupon bonds are frequently cited as a popular investment vehicle for education savings ...

  12. In the separate account of a variable annuity, which of the following characteristics apply to annuity ...

  13. ABC Broker-dealer has no office in state and transacts fewer than five trades during a 12-month period

  14. Under a pegged exchange rate system which of the following measures can be undertaken by a home country ...

  15. A head and shoulders top formation chart: I. is a bearish chart II ...

  16. Which of the following statements is (are) true with respect to the coefficient of determination ...

  17. Your client has a net short-term gain of $3,000 and a net long-term loss of $8,000. Which of the following statements are true?

  18. A person whose registration has been revoked by an Administrator due to a felony conviction of a securities-related ...

  19. A sales representative or broker-dealer that violates the Uniform Securities Act when offering or selling ...

  20. Which of the following statements regarding rollovers versus transfers of IRA accounts are true?  

RELATED FAQS

  1. A margin account has a long market value of $12,000, a debit balance of -$6,000 ...

    The correct answer is a. I is correct since the stock's currently valued at $12,000 are increasing 20% or $2,400. II is incorrect ...
  2. Which of the following statements is(are) true with respect to the factors that ...

    The correct answer is: c) (I) is incorrect because while he amount of new underwriting business that may be undertaken is ...
  3. Under the Uniform Securities Act, registration with the Administrator as an investment ...

    The correct answer is c. I is incorrect, since broker-dealers or their agents who don’t receive a fee for making investment ...
  4. Which of the following are tools that are employed by the Federal Reserve in its ...

    I. Moral suasionII. Changing the discount rateIII. Changing the reserve requirementIV. Changing the prime interest rate A. ...
  5. If a sales representative moves from one broker-dealer to another ...

    The correct answer is b. I, II and III are correct since all parties are required to notify the Administrator.
  6. Federal covered securities are subject to which of the following requirements ... ...

    The correct answer is b. Federal covered securities are subject to only federal registration with the SEC and do not have ...
RELATED TERMS
  1. Pin Risk

    A risk that the writer of an options or futures contract faces ...
  2. Grantor

    1. A seller of either call or put options who profits from the ...
  3. Put To Seller

    The exercise of a put option. Put to seller would usually occur ...
  4. Direct Writer

    A captive agent that only issues insurance policies from a specific ...
  5. Premium Income

    1. In investing, income that is earned through the sale of an ...
  6. Minimum Margin

    The initial amount required to be deposited in a margin account ...
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center