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Strategies & Market Trends : Sonki's Links List -- Ignore unavailable to you. Want to Upgrade?

To: Sonki who wrote (280)	11/25/1998 8:07:00 PM
From: Sonki	Respond to of 395

Underdstanding your balance money Market Balance Cash Credit Cash Market Value Total Money Market Value* Option Market Value Option in the Money Amount Margin Equity Margin Market Value Margin Debit Margin Equity Percent Short Market Value BUYING POWER Available to Borrow Equity Buying Power House Surplus NYSE Surplus Federal Call Networth = Stock component + Option Component Networth = Stock component + Option Component Stock Component = Margin Equity ( mgn mkt value (stks only) - debit balance used to buy stks ( no options) option component = ( opt mkt value + option -in-the-money amount) Mgn debit balance = ( mgn for buying stks on mgn) - ( all cov.calls sld )+ in-th e-money cov.calls The above are in agreement with fido defs. Note: When covered calls sld initially, it reduces debit balance. When some c ov.calls come in-the-money ( mkt turns against u) , it will increase the debit balance by t he difference of the current increased cov.call and its cost. ------------------------------------------------------------------ Option Component in Networth = opt market value + opt. in-the-money amount Option Market value (A): algebraic sum of all options in the positions ( opts - cov.calls) A = Non-cov. call options (B) - ( cov.call options not-in-the-money (C) + cov.calls in-the-money (D) ) A = B - ( C + D) Option in the Money amount = cov. calls in the money (D) After cov. calls sold the cash ( C + D ) is credited to the mgn bal (debit) , reducing the mgn balance. Networth = mgn Equity + Option mkt value + opt-in-the-money = mgn equity + B - C - D + D = mgn equi + B - C i.e. the opt. component in the net worth will not include in-the-money opt For ease : Assume D = 0 when cov. calls sold. i.e all the cov. calls sold are not-in-the-money. -------------------------------------------------------------------- Some cov. calls are in in the money ( stk price > strike price) Using the above formulas: Now D has a positive value This has effect on debit balance. This increases the debit balance by D. Buying Power gets reduced