Do you need to own the underlying stock before you write an option?

Hey folks,

I was curious to know whether you need to physically own the underlying stock before writing an option?
Or you just need the margin money deposited with the broker?

How much is the margin which needs to be mantained?

Thanks
Dr Shishir

Just the margin is enough to write an option.

how much margin?
depends on the underlying, lot size, expiry, strike. Can be found on broker's SPAN margin file.

rgds,

I believe the requirement is less than margin as you will be receiving the premium by selling the option.

in india, options are cash settled and not physically settled. so dont need to own the underlying stocks. yes you shall have enough SPAN,MTM margin with the broker else his risk management system shall liquidate your position.

No you don't need underlying stock for writing an option ,
suppose u wont to write a write a nifty call option Strike Price 5500
Then you will req 5500* 50* 10 or 12 % = 27000-30000 approx depending
and at the same time you will receive premium i.e 50 * Price of Call option .
i mean there will be inflow of cash