Why is the holder of an option not required to post margin under the Option Clearing Corporation rules?
A) Once an option is purchased, no further money is at risk.
B) The seller pays all costs.
C) The credit worthiness of the holder covers all potential losses.
D) The holder must post securities instead of margin.

Question

Quizplus · Accepted Answer

The holder of an option has already paid the premium for the option, which is the maximum amount they can potentially lose. Therefore, they are not required to post margin.

Why Is the Holder of an Option Not Required to Post