Chapter 04 · Section 4.1

Excess Magin- GM

END OF DAY                          MARGINS                 Closing Prices
short 3 covered Colgate Nov35 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 Call$ 3.60   
excess margin:                      $ 2,820  Unisys Nov 75 Put  $ 1.75   

TINA'S TRANSACTIONS ON DAY 3: Sold 2 GM March 70 puts at $2.00

TINA'S POSITIONS DURING DAY 3                      Current Prices 
short 3 covered Colgate Nov35 calls $     0  GM stock      $70.00     
uncov. Colgate Nov35 calls          $ 3,330  GM Mar 70 put $ 2.00   
long  5 Unisys Nov 75 puts          $     0   
short 2 uncov. GM Mar 70 puts       $ 2,560 
            excess margin:          $ .....  

By what amount will Tina's excess margin be reduced just after the sale?

a) +2160
• b) -2560
  No. You are not far but the question is by how much will Tina's excess margin reduced. You answered with the increase in the margin requirement. The difference between the two is premium received for the puts sold.
  c) -3500

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