Chapter 04 · Section 4.1

Liquidation

How does the broker liquidate the positions of a customer who fails to meet his margin call?

a) He informs the clearing house that he wants the customer's positions cancelled.
• b) He has to buy the options at the best possible price on the market, just as if the customer had given the order to do so.
  No. This is correct, but if necessary the broker can also liquidate (i.e. sell) the long positions.
  c) He has to sell the options at the best possible price on the market, just as if the customer had given the order to do so.
  d) He has to buy the options at the best possible price on the market, so as to liquidate the short positions. If necessary, he can also sell the long positions.

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