Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please include excel formulas to fill in the yellow blanks for this question! Thank you very much!!! A United States investor writes eight naked call

Please include excel formulas to fill in the yellow blanks for this question! Thank you very much!!!
A United States investor writes eight naked call option contracts and eleven naked put option contracts
(each contract is for options on 100 shares). The call option price is $5.00, the put option price is $10.55,
the strike price for both calls and puts is $90.00, and the stock price is $84.00. What is the initial margin
requirement for the investor?
This information is summarized in the table below.
The initial and maintenance margin for a written naked call option is the greater of the following two
calculations:
Calculation 1: A total of 100% of the proceeds of the sale plus 20% of the underlying share price less the
amount if any by which the option is out of the money
Margin requirement for all written call option contracts
Calculation 2: A total of 100% of the option proceeds plus 10% of the underlying share price
Margin requirement for all written call option contracts
Therefore, the initial and maintenance margin for all written naked call options is:
The initial and maintenance margin for a written naked put option is the greater of:
Calculation 1: A total of 100% of the proceeds of the sale plus 20% of the underlying share price less the
Please include excel formulas for the yellow blanks! Thank you!!
Margin requirement for all written put option contracts
Calculation 2: A total of 100% of the option proceeds plus 10% of the exercise price
Margin requirement for all written put option contracts
Therefore, the initial and maintenance margin for all written naked put options is:
Hence, the total initial margin requirement for the investor is:
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Foundations of Financial Management

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta

10th Canadian edition

1259261018, 1259261015, 978-1259024979

More Books

Students also viewed these Finance questions