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+150 Part II: Call Option Strategies 
+INVESTMENT REQUIRED 
+The ratio writer has a combination of covered writes and naked writes. The margin 
+requirements for each of these strategies have been described previously, and the 
+requirements for a ratio writing strategy are the sum of the requirements for a naked 
+write and a covered write. Ratio writing is normally done in a margin account, 
+although one could technically keep the stock in a cash account. 
+Example: Ignoring commissions, the investment required can be computed as fol­
+lows: Buy 100 XYZ at 49 on 50% margin and sell 2 XYZ October 50 calls at 6 points 
+each (Table 6-2). The commissions for buying the stock and selling the calls would be 
+added to these requirements. A shorter formula (Table 6-3) is actually more desirable 
+to use. It is merely a combination of the investment requirements listed in Table 6-2. 
+In addition to the basic requirement, there may be minimum equity require­
+ments and maintenance requirements, since naked calls are involved. As these vary 
+from one brokerage firm to another, it is best for the ratio writer to check with his 
+broker to determine the equity and maintenance requirements. Again, since naked 
+calls are involved in ratio writing, there will be a mark to market of the position. If 
+the stock should rise in price, the investor will have to put up more collateral. 
+It is conceivable that the ratio writer would want to stay with his original posi­
+tion as long as the stock did not penetrate the upside break-even point of 63. 
+TABLE 6-2. 
+Investment required. 
+Covered writing portion (buy 100 XYZ and sell 1 call) 
+50% of stock price 
+Less premium received 
+Requirement for covered portion 
+Naked writing portion (sell 1 XYZ call) 
+20% of stock price 
+Less out-of-the-money amount 
+Plus call premium 
+Less premium received 
+Requirement for naked portion 
+Total requirement for ratio write 
+$2,450 
+600 
+$1,850 
+$ 980 
+100 
++ 600 
+600 
+$ 880 
+$2,730