Chapter 04 · Section 4.1

Initial Margin Day 3

Situation at the beginning of day 3

POSITIONS                                MARGINS 
short 3 covered Colgate Nov 35 calls      $     0   
short 3 uncov. Colgate Nov 35 calls       $ 3,330 
long 5 Unisys Nov 75 puts                 $     0 
excess margin:                            $ 2,820

Day 3: General Motors stock currently trades at $74 and GM March 70 puts at $2.00. Tina sells 2 GM March 70 puts.

What is the initial margin requirement for this transaction?

c) -3360
No. The GM puts Tina sold are out-of-the-money. You have to deduct the out-of-the-money amount of $4 per share or $400 per put.
d) -1280
e) -2960

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