A 'naked' call currency option implies that:
A) the writer has no spot position in the underlying currency
B) the writer has a spot position in the underlying currency
C) the option can be exercised before the expiry date
D) the option cannot be exercised before the expiry date

Question

A 'naked' call currency option implies that:
A) the writer has no spot position in the underlying currency
B) the writer has a spot position in the underlying currency
C) the option can be exercised before the expiry date
D) the option cannot be exercised before the expiry date

Quizplus · Accepted Answer

A 'naked' call currency option means the writer (seller) of the call option does not hold an underlying position in the currency itself, exposing them to potentially unlimited losses if the currency value rises.

A 'Naked' Call Currency Option Implies That