Why Is the Holder of an Option Not Required to Post

question 68

Multiple Choice

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.

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Definitions:

Job-Order Costing System

An accounting method used to accumulate and assign costs to custom or unique products or jobs.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to products or job orders, based on estimated costs and activity levels.

Manufacturing Departments

Specialized functional areas within a manufacturing facility where specific stages of production are carried out.

Machine-Hours

A measurement of production time using the number of hours machines are operated.