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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)
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To: Dan Duchardt who wrote (2146)8/29/2001 12:14:36 AM
From: J. P.  Read Replies (1) of 2241
 
I have a dumb question pertaining to credit spreads.
Say stock XYZ is selling for $50 a share. I'm mildly bearish on the stock.

I sell a Sept 50 call for 5 dollars a contract ($500).
I buy a Sept 55 call for 2 dollars a contract ($200).

My margin requirement should be ($5 the strike spread x 100 shares) - ($300 which is my credit) for a total of $200...is this correct?

And say I'm wrong (me? never! ha ha) and XYZ zooms up to $60 dollars a share by Sept expiration...Do I have to go ahead and purchase 100 shares of XYZ for 55 dollars a share by excercising my option to physically deliver them (or $5500), or do I simply lose my $200 dollar margin requirement?

Thanks much in advance, hope this wasn't too confusing...
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