Question

a) Suppose you write five naked call option contracts. The option price is $3.50, the strike price is $60.00, and the stock price is $57.00. What is the margin requirement? b) Suppose you write five naked PUT option contracts. What is the initial margin requirement?

Answer 1

calculating intial margin for naked options 1) Calculate the otion loremium for 100 shares. (1) Calculate 0.20 (Stock's market price) x 100 Then the margin = (i) +(11) Option beremium = $3.50 stock price = $57.00 We have, (i) we 'calculate ophion bremium = 3.50x100 = 350 :) Then, we calculate= 0.20 (57)x 100 = 1140 + Then, the margin = 350+ 1140 = 1$ 1,490 b) In inkal margin we calculate from two methods and higher of these two is our margin cinsial margin) The first case . ; Ophon premium X 100 ii) Then compute 20x (Marlat value feu share) x 100 (i) Then compute the amount by which the contrast is out of may Then margin amount ut i) + ii) - ) The second method Mougin = 100x ophon premiuus by showet oild (stock mlet pricxloo