Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Margin Calls - Share The Pain -- Ignore unavailable to you. Want to Upgrade?

To: daffodil who wrote (102)	12/4/2000 12:01:27 AM
From: daffodil	Read Replies (2) \| Respond to of 158

Calculation of margin on naked put options: This calculation is identical to that for naked calls, with one exception: instead of a % of the underlying stock value as represented by the previous closing price of the stock, you use the amount represented by the strike price of the option. So, to write 10 puts January 40 puts ITM with the stock at $30, for a premium of $12: Option premium $ 12,000 Plus 20% of strike $ 8,000 Minus $ OTM ( $ 0) ___________ Requirement $ 20,000 Minimum calculation: Option premium $ 12,000 Plus 10% of strike $ 4,000 ________ Requirement $ 16,000 Therefore, the $20,000 requirement will apply To write 10 January 40 puts OTM with the stock at $50, for a premium of $2: Option premium $ 2,000 Plus 20% of strike $ 8,000 Minus $ OTM ( $ 10,000) ___________ Requirement $ 0 Minimum calculation: Option premium $ 2,000 Plus 10% of strike $ 4,000 ________ Requirement $ 6,000 therefore, the requirement is $6,000. As with naked calls, the minimum calculation usually applies when the options are OTM. With naked puts, the same principles apply with initial vs. maintenance margin: initial margin uses the actual premium from the sale and last night's closing price; maintenance margin uses the previous closing prices for both the premium and the underlying stock. Previously, both calls and puts used the same calculation for underlying stock; however, in January 2000, puts went to a strike-price based system.