What Action Can a Writer Take to Reduce the Margin Requirement on an In-the-Money Naked Call?
The writer can reduce the margin requirement by converting the naked call into a defined-risk spread, such as a bear call spread, by buying a higher-strike call option. This caps the maximum potential loss, which in turn lowers the broker's required collateral.
Alternatively, they can close the position entirely or deposit more cash.
Glossar
Writer
Obligation ⎊ A writer, within cryptocurrency and derivatives markets, assumes contractual obligations through the sale of options or the shorting of underlying assets, establishing a defined liability contingent upon future price movements.
Naked Call
Exposure ⎊ This strategy involves selling a call option without holding the corresponding amount of the underlying cryptocurrency to cover the potential obligation.