Chapter 04 · Section 4.1

Tina- Margin Requirements

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. The margin requirement is thus $3480.

How much cash does Tina have on account in excess of her margin requirement?

• a) +3920
  Yes. Tina has $5,000 in cash and received $2400 (= 6 * 400) in premiums. Thus she has $7400 on account. Her margin requirement is $3480. The excess amount is the difference between these figures, i.e. $3920. Continue
  b) -1520

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