Question

What event is likely to cause force liquidation of your position?
A) Margin cushion is equal to or less than zero
B) Account doesn't have enough equity to receive or deliver post-option expiration posi
C) Both A and B
D) None of the above

Answer 1

Answer:

The event that is likely to cause force liquidation of your position is:

C) Both A and B

Both scenarios described in options A and B could lead to force liquidation of your position:

A) When the margin cushion (the difference between the value of your position and the required margin) falls to zero or becomes negative, it can trigger a margin call, leading to force liquidation if you fail to meet the margin requirement.

B) If your account doesn't have enough equity to receive or deliver post-option expiration positions, it can also lead to forced liquidation of your position to meet the obligations.

Therefore, both conditions mentioned in options A and B could result in force liquidation, making option C the correct choice.