Chapter 04 · Section 4.1

Margin Requirement Day 2

Unfortunately Tina was wrong. Rather than declining, the Unisys stock went up. The Unisys puts, bought at $2.50, went down to $1.75. Here is her situation at the end of day 2.

Positions                          Margins  Cosing Prices   

short 3 covered Colgate Nov 35 calls $     0   Colgate Stock    $37.50
short 3 uncov.  Colgate Nov 35 calls $ .....   Colgate Stock    $37.50
long  5 Unisys Nov 75 puts           $ .....   Colgate Nov 35 C $ 3.60
                                               Unisys Nov 75 P  $ 1.75
excess margin:                       $ .....         

What is the total margin requirement at the end of the day? Please enter the appropriate dollar amount.

• a) +3330
  Yes. Tina must pay the whole premium for the Unisys puts she bought, but there is no margin on them. Her uncovered short position in Colgate calls requires $3330 (i.e. three times 20% of $3,750 + 100% of $360). Continue
  b) +3500

(Click here for help)