Chapter 01 · Section 1.1

Margin Calls

                       OTC OPTIONS      EXCHANGE-TRADED OPTIONS
 

Contract Terms          negotiated         standard
Delivery                perhaps 50%        less than 10%
Trading                 by arrangement     centralized
Credit Risk             parties            clearing house
Liquidity               varies             generally high
Margin calls            .........          minimum margin regulated

With OTC options, margins are:

a) negotiated by the parties
b) standard.
• c) variable, depending upon whether the option is purchased or written.
  No. Margin requirements may vary from one OTC option to another. But when an option is sold by someone, it is bought by someone else, and there is one single margin requirement: for the writer.

(Click here for help)