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Technology Stocks : CMGI What is the latest news on this stock? -- Ignore unavailable to you. Want to Upgrade?

To: AmericanVoter who wrote (11683)	7/13/1999 10:53:00 PM
From: PAL	Read Replies (1) \| Respond to of 19700

Hi Amein, I have been out the whole day which explains my belated answer. Margin requirements for naked puts are confusing to say it mildly. Maybe that fellow at MSDW is mixing the strike price and the premium and lump them together such that when the stock drops, the margin requirements can go as high as 100%. There is also a difference between margin requirement and liquidation deduction. Let us start with how much does a stock provides coverage for the margin requirement: a. You have $ 10,000. b. You buy 100 sh of XYX at $ 100 = $ 10,000. c. If XYZ margin maintenance is 30% before you get a margin call, then you have maximum $ 7,000 available for margin requirement for a short naked put. IF XYZ margin is at 40%, you have $ 6,000, etc up to if XYZ is at 100% margin, you have no coverage. BTW Brown raised the margin requirement for AOL from 40% to 50%. Brown has the following requirements for naked puts: a. Minimum liquid net worth $ 50K (initial requirement) b. maintenance for naked option: 20% of underlying price of the stock plus premium of the option minus out of the money. c. Example: CMGI closed at 113 7/8. You are short 1 naked put Sep100 (GCBUT), which is at 10.5. The margin requirement is: 20% of 113 7/8 plus 10.5 minus 13 7/8 (out of the money amount) equals to 25.10 times 100 = $ 2,500 per contract. You need to have either cash $ 2,500 or securities which provide coverage of $ 2,500 (based on the example above). If the stock is way out of the money, there is a floor for the margin maintenance, which is current premium plus 10% of the underlying stock. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ If the stock drops drastically to almost zero, then you can have maintenance requirement 100% of the strike price, which is the maximum you are at risk (less premium received). Margin requirement is generally higher than deduction for liquidation. Use the example above: margin requirement is $ 2,500, while deduction for liquidation is $ 1,050 ($ 10.50 the premium times 100 shares). ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Brown shows on its Account Balance the Cash Available, so that you know on a daily basis how far you are from margin call. Jack White/Waterhouse Securities on the other hand is behind the times, and even though we have made strong suggetions, they have not made any changes. Even the basic features like the date and the <Acct # do not appear on the Account Balance. So much for Waterhouse Securities, which might explain why TWE is not moving at all, still at around the IPO price! Disclaimer: I use Brown for only the past 2 months. I have no recommendation one way or another. I can only say that the website is not fancy, just like a brown bag. Good Luck to you. Paul