In question #1 and #2 assume that the initial margin requirement for a naked options is the premium plus 20% of the stock value plus any necessary adjustments for not being at the money. Also assume the margin requirement for stock is 50%.

1. An investor buys a naked call option. The option price is $4 at a strike price of $50 and a stock price of $52. What is the investor's net cash outflow when entering into this trade?

a. 4

b.50

c.400

d.1040

e. 1440

2. An investor writes a naked call option. The option price is $4 at a strike price of $50 and stock price of $52. What is the investor's net cash outflow when entering into this trade?

A. 50

b.400

c.520

d.1040

e. 1440