Final answer:
The correct answer is that both the seller and the buyer of an option must post margin. Sellers need to post margin to cover potential obligations, and buyers might have to maintain margin depending on the trading style.
Step-by-step explanation:
The correct answer is option C, the seller and the buyer of an option must post margin. In the context of options trading, margin refers to the funds that the investor must deposit with a broker to cover some or all the risk the investor poses for the broker. The seller of an option, also known as the writer, must post margin to ensure that they can cover any potential obligation as they are at risk of having the option exercised by the buyer. Although the buyer of an option pays the premium up front and does not have an obligation to buy or sell the underlying asset, some styles of options trading, such as writing covered calls or purchasing on margin, may require the buyer to maintain margin as well. Therefore, both parties involved in options trading may be required to post margin but under different circumstances.
In the context of financial markets, when trading options, both the seller and the buyer are required to post margin.
Margin is a collateral deposit that traders are required to make to cover potential losses. It is typically a percentage of the total value of the option contract.