# Margin requirement when selling naked calls

## Uncovered call selling can only be performed in a margin account

The margin requirement for an uncovered call is the greatest of the following calculations times the number of contracts times the multiplier (usually 100):

• 20% of the underlying price minus the out-of-the-money amount plus the option premium
• 10% of the underlying price plus the option premium
• \$2.50

The premium received from the sale of the short call may be applied to meet the initial margin requirement.

## Example of selling a naked short call in a margin account

Sell to open 1 MAR 68 call at \$1.50 with the underlying stock at \$65:

• [((.2 x 65) - 3) + 1.50] x 1 x 100 = \$1,150
• [(.1 x 65) + 1.50] x 1 x 100 = \$800
• \$2.50 x 1 * 100 = \$250

The requirement for this position would be \$1,150. The \$150 of proceeds generated from the sale can be applied to the margin requirement, the buying power required for this trade would be \$1,000.
Please note that some underlyings may have elevated margin requirements. For example, naked options in cash-settled indices use 25%/15% instead of 20%/10%. Naked calls in IRAs have a minimum requirement of 100%/50%.