POSITION AT THE BEGINING OF DAY 4 MARGINS
short 3 covered Colgate Nov35 calls $ 0
uncov. Colgate Nov35 calls $ 3,840
long 5 Unisys Nov75 puts $ 0
short 2 uncov. GM Mar70 puts $ 3,000
margin deficit: $ 370
Previous Day's Closing Prices
Colgate stock $39.00
Colgate Nov35 call $ 5.00
GM Stock $72.00
GM Mar70 puts $ 3.00
Unisys Nov75 put $ 1.75
Day 4: In order to meet her margin call, Tina sells 100 Colgate
stocks at $ 38.50.
Supposing that all the closing prices of Day 4 are the same as they were for Day 3, what would Tina's excess margin be at the end of Day 4?
a) +2200
b) -3480
If Tina sells 100 Colgate stocks, one covered option will become uncovered. (Tina initially had 300 colgate stocks)
If the closing prices are the same as in Day 3, one uncovered Colgate 35 call requires $1,280 margin (since $3840 is the margin requirement for 3 Colgate 35 calls).
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.