I recently had a conversation with a good friend of mine. Our friendship blossomed when he talked about puts one day in our Applied Investments class. My head whipped around to locate the person that was finally speaking my language, and once we did the options trader secret handshake, we became fast friends.
One of our more recent conversations surrounded the economics of options – He said that basically, if you’re on the sell side of a naked option, your margin requirement (collateral) is going to be pretty high.
But I disagree.