Comment on Basics on Options Shorting/Writing

Prabhakar commented on 09 Jan 2014, 03:25 PM

Nithin,

I understand that margin is required when one writes the naked option and has to arrange MTM funds. A question in my mind for a long time is, when one takes a debit spread, say long 6200 call and short 6400 call, the maximum the person looses is the difference in premium which was already paid. In such a case why should a margin be collected, though the margin is less than naked option writing? Is it not sufficient to block selling the long option alone before covering the short option?

Thanks,
Prabhakar.

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