A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. Which statement is TRUE about this?

A. The representative can do this without taking any further action

B. The "Special Statement for Uncovered Options Writers" must be provided before executing the transaction

C. The "Options Disclosure Document" must be provided before executing the transaction

D. The representative must open a separate options account for the customer and segregate the resulting naked options positions

Question

Caden Macdonald

Business

4 April, 20:11

A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. Which statement is TRUE about this?

A. The representative can do this without taking any further action

B. The "Special Statement for Uncovered Options Writers" must be provided before executing the transaction

C. The "Options Disclosure Document" must be provided before executing the transaction

D. The representative must open a separate options account for the customer and segregate the resulting naked options positions

+3

Answers (1)

Know the Answer?

Luna Wiley · Answer 1

The correct answer is letter "B": The "Special Statement for Uncovered Options Writers" must be provided before executing the transaction.

Explanation:

A naked call is a type of strategy options traders use when writing a call option without owning the underlying assets. For this to be possible, the trader must sign an options agreement and the Registered Options Principal (ROP) must approve the account so the trader can write naked options.

Before proceeding the "Special Statement for Uncovered Options Writers" must be provided.