quiz4 - . 5 100 + 0 . 1 100 26 = 310 . The margin...

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Name Quiz 4 1. On CBOE, a trader sells a naked call on MSFT with a strike price of $30 when the concur- rent stock price of MSFT is $26. The option price is 50 cents. What is the initial margin requirement? The margin is the bigger of the following two calculations: 100% of the proceeds from selling the call, plus 20% of the underlying stock, minus the amount by which the options are out of the money. 0 . 5 × 100 + 0 . 2 × 100 × 26 4 × 100 = 170 . 100% of the proceeds from selling the call, plus 10% of the underlying stock.
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Unformatted text preview: . 5 100 + 0 . 1 100 26 = 310 . The margin requirement is $310 per contract. 2. Use a payo f diagram to illustrate how a bear spread can be created with put options. Buy a put with a higher strike price and sell a put with a lower strike price. Your diagram should show not only the payo f of the bear spread, but also the payo f s of the component puts. 1...
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This note was uploaded on 03/19/2008 for the course FI 478 taught by Professor Yu during the Spring '08 term at Michigan State University.

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