previous next menu home

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?

display  helpTina has $5000 in cash. She also received the premium for writing 6 Colgate 35 calls. The premium is $4 per share, or $400 per call. MARGIN = 20 % of the current value of the underlying stock. PLUS 100 % of the premium. MINUS the amount the option is out-of-the-money.