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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Herm who wrote (8588)	9/16/1998 8:42:00 AM
From: Senator949	Respond to of 14162

Herm, While doing a option symbol search for TNSI using "Transaction" I also got TSAI (Transaction Systems Architects Inc) and being curious I took a look at it's chart. On a quick look using BB and RSI it should be within a few days of bear-trap material. Having better research resources than I do I thought you might want to check it out for us. Robin

To: Herm who wrote (8588)	9/16/1998 12:44:00 PM
From: Douglas Webb	Read Replies (1) \| Respond to of 14162

Off Topic: Weird margin behavior? This is kind of strange... I'm holding some stock and some long calls in my brokerage account, and their market values are going up. But, my Percent Equity, as reported by my broker, is going down! If it hits 50%, I'll get a margin call! Why is PE calculated this way? Here's the calculations, as far as I can tell: Percent Equity (PE) = Net Equity (NE) / Market Value (MV) NE = Total Equity (TE) - Option Market Value (OV) TE = Cash (C) + MV MV = Stock Market Value (S) + OV When you reduce all this to cash, stock value, and option value, you get: PE = (C+S) / (O+S) This means that PE goes down when O goes up! Specifically, I'll get a margin call when PE >= 50%: 1/2 >= (C+S) / (O+S) O+S >= 2C + 2S O >= 2C + S If my option value becomes greater than my stock value plus twice my cash, I'll get a margin call, even if everything I own is going up in value! This actually happened to me two weeks ago, when I bought 12 Jan 17.5 Creaf calls, which are a large proportion of my holdings. I had a margin call for one day, before the market value of those calls dropped. Has anyone noticed this before? Why would long calls be held against me for margin calculations? Doug.