Chapter 04 · Section 4.1

Excess Margin Day 2

This is the summary of what happened up to the end of day 2.

                                       Margin              Closing Prices
short 3 covered Colgate Nov 35 calls   $   0    Colgate Stock    $37.00
short 3 uncov. Colgate Nov 35 calls    $ 3,345  Colgate Nov 35 C $3.75 
excess margin:                         $ 4,055         

short 3 covered Colgate Nov 35 calls  $     0  Colgate Stock         $37.50    
short 3 uncov. Colgate  Nov 35 calls  $ 3,330  Unisys Stock          $75.00    
long  5 Unisys Nov 75 puts            $     0  Colgate Nov 35 Calls  $3.60     
excess margin:                        $ .....  Unisys Nov 75 Puts    $1.75

What is the excess margin at the end of the second day?

• a) +2820
  Yes. At the beginning of Day 2, Tina had $4,055 in excess margin. The 5 Unisys puts she bought cost $1,250. Since the new margin requirement on the Colgate calls is $15 less, the new excess margin is $2,820 ($4,055 less $1,250 plus $15). Continue
  b) -4070
  c) -2805
  d) -4040

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