Why are margins required for option sellers? Option: To compensate for the limited profit potential., To stabilize the options market and prevent price fluctuations., To cover potential losses due to unlimited risk., To ensure the option buyer fulfills their obligations.

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Why are margins required for option sellers?

To compensate for the limited profit potential.

To stabilize the options market and prevent price fluctuations.

To cover potential losses due to unlimited risk.

To ensure the option buyer fulfills their obligations.

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What is the primary reason for charging margins in trading?

To manage and mitigate potential risks

To discourage excessive trading activity

To cover administrative costs of trading

To generate revenue for brokerage firms

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What is the primary purpose of the margin system in stock markets?

"To increase trading volume in the market"

"To stabilize fluctuating stock prices"

"To mitigate risks associated with price uncertainty"

"To ensure profits for investors"

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What is the potential loss for a put option seller?

Unlimited

Limited to the difference between the strike price and the spot price

Dependent on the implied volatility of the underlying asset

Limited to the premium received

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What is the purpose of 'Devolvement Margin' in commodity options?

To pay for the option premium

To ensure sufficient funds for futures contract conversion

To offset the risk-free rate

To cover potential losses from option writing

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What is the primary function of margin in futures trading?

To predict the future price movements of the underlying asset.

To calculate the potential profit or loss of a futures contract.

To ensure that both parties fulfill their obligations on contract expiry.

To determine the daily settlement price of futures contracts.