Chapter 04 · Section 4.1

Margining case study - Tina writes 6 calls

Tina (like Linda) has $5000 in cash and 300 fully-paid Colgate stocks in her account. Colgate stock is currently trading at $38.

Day 1: Tina writes 6 Colgate 35 calls at $4.00. Is there a margin requirement for her transaction?

a) no
• b) yes
  Yes. Tina has sold 6 calls but has only 300 shares of underlying stock. Therefore she is uncovered for 3 of the 6 calls she has written. Continue

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