Chapter 04 · Section 4.1

Tina's Initial Margin

Tina has $5000 in cash and 300 fully-paid Colgate stocks in her account. Colgate stock is currently trading at $38. On day one, she writes Colgate Nov 35 calls at $4.00. What is her initial margin requirement?

Remember:

• MARGIN = 20 % of the current value of the underlying stock
• PLUS 100 % of the premium
• MINUS the amount the option is out-of-the-money

a) -3180
b) -2580 -6090 -260
• c) -6960
  No. $6,960 is the margin requirement for 6 uncovered Colgate calls. Tina wrote only 3 uncovered Colgate calls since she owns 300 fully-paid Colgate stocks. Please try again.
  d) -1160
  e) +3480

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