The premium on a LEPO tends to move similarly to that of a futures contract.

Question

Quizplus · Accepted Answer

An important feature of these options is the requirement for deposit and margining of the premium on a daily basis.Thus a premium is not paid on taking the option position.Rather,the option writer and taker are liable for margin adjustments as the option premium changes over time.If the premium rises (falls),then the option writer's (taker's)margin account is reduced (increased)by the amount of the rise (fall),and the option taker's (writer's)account is increased (decreased)by the same amount.

The Premium on a LEPO Tends to Move Similarly to That